If You’re Young, Do You Need Life Insurance?

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While the life insurance industry would likely say that everyone should protect themselves (or rather their family’s wallets) with life insurance, there’s a school of thought gaining momentum in financial circles that Americans 40-and-under (and without children) don’t really need it after all. After all, the risk of death is low for those under 40, and if you don’t have a family to provide for, why spend money on something you probably won’t need – especially in this downbeat economy?

“Generation Y” seems to agree. Right now, Americans young and old are avoiding life insurance – probably as a result of lower incomes and higher debt accrued during the recent Great Recession. According to an August, 2010 study from LIMRA, ownership of life insurance in the U.S. is at a 50-year low. Only 44% of Americans have life insurance right now, and 11 million households with children under 18 – parents right around that “40-and-under” benchmark – have no insurance at all.

In addition, the insurance industry isn’t exactly falling over itself to aggressively court younger Americans. A 2009 study from Agent Media says that exactly 0% of insurance sales professionals are primarily selling life insurance to 20-something consumers.

But is avoiding life insurance a bad move for younger Americans? Accidents and illnesses do happen, and financial disaster may well await families who lose their primary breadwinner and have no life insurance, but how do you know what financial effects your untimely passing might have on your family?

You can start by asking yourself a few questions:

  • If you were to pass on – even at an early age – would your family have the cash to cover a funeral and other immediate expenses? Traditional funerals cost an average of around $6,000, according to the FTC, but can easily cost thousands more.
  • How much cash would your family need to live at your current standard of living?
  • The critical question: Are you supporting loved ones whose well-being depends on your financial contributions? If you’re nodding your head up-and-down, chances are you need life insurance. That’s especially true for families with children below college age, as they are more dependent on your income to keep afloat financially after you’re gone.

That sounds like a lot of young American families. The good news is that, since 40-and-unders are healthier than their Baby Boomer elders, life insurance is cheaper and easier to get for them. For a healthy 40-year-old breadwinner, some policies of up to $250,000 can be had for as little as $15 per month.

You’ll need to do your homework to get the right answers. This web site has a useful Human Life Value Calculator that estimates the financial loss resulting from your passing. The site also has a Life Insurance Needs Calculator that estimates how much life insurance you’ll need.

Maybe it’s time for Generation Y types to get some life insurance – and maybe it’s not. But if you have a family, or other loved ones you want to take care of, you owe it to them and to yourself to at least check it out.

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