For millennials, the idea of taking out life insurance seems a little excessive. When you’re in your twenties and thirties, the chances of dying are pretty low. Plus, you’ve got lots of other things to worry about: your avocado toast plans, building your career, and whether you can afford that deposit on your first home. Life insurance is about as interesting to you as annuities or pensions.
But here’s the thing: even millennials might need life insurance. It’s one of those things that can benefit people throughout the life cycle, not just when they’re past the age of 55.
Life insurance is a type of insurance which pays out a sum of money to your next of kin when you’re gone. The basic idea is to continue providing your family with the income you would have earned if you end up dying in some tragic accident. The last thing you want is to get killed, forcing your partner to go out and get a job to support your two-month-old baby. That would be a nightmare of epic proportions. Life insurance protects your family against financial disaster, keeps them off the streets and out of the welfare system.
Take a look at the following life insurance tips for millennials.
Tip #1: Buy Life Insurance If You’re Married With Kids
Once you’ve got kids, life insurance becomes something of a must-buy, especially if your spouse depends on your income. Life insurance will make payouts based on the number of children you have, your income level, and so on. In general, it’s a good idea to buy a policy that pays out ten times your annual take-home salary.
Tip #2: Choose The Type Of Life Insurance That’s Best For You
In general, there are two kinds of life insurance: “term” and “permanent.”
Term life insurance is a type of life insurance that pays out a lump sum when you die, as long as you die within the term set out by the policy. So, for instance, if the term is ten years, then you need to die in ten years to qualify and for a payout to be made. At the beginning of the policy, you can specify the size of the payout that you’d like. The insurer will then calculate the premium you need to pay, with higher monthly premiums for more substantial lump sums.
Permanent life insurance doesn’t have term limits. It pays out whenever you die. The way permanent life insurance is structured differs too. Often you have the opportunity to pay premiums into a tax-deferred savings account, collecting interest along the way. Premium life insurance policies, however, tend to be a lot more expensive.
Tip #3: Don’t Choose More Life Insurance Than You Need
Okay, so now that you’ve decided you need life insurance, how much coverage should you buy? Most policies offer somewhere between £250,000 and £1 million, but the actual amount you need depends on your current outgoings. Ideally, you’ll want to provide family members with around ten years worth of income that they can invest.