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So you think you’re too young for life insurance?

A young man looks at his phone while drinking a coffee.

There are a lot of challenges facing the millennial generation, such as high student loan debt, rising housing prices and unstable employment situations. If you’re in the 20 to 35 age group and dealing with some of these issues, life insurance may be the last thing you’re thinking about.

But it shouldn’t be. Now may be the best time for you to buy life insurance.

Young people have a lot to insure

There’s no question that housing prices in Canada are rising steadily.1 And if you’re among the 50% of Canadians under age 35 who have dived in early to buy a home,2 you may be carrying a large mortgage. You may also have — or look forward to having — a young family that will depend on your income for many years. The Financial Post reports that four in 10 generation Y households would be in immediate financial trouble if a primary wage earner were to die.3 Life insurance benefits would help your partner to pay the mortgage, and help with things like living expenses and your kids’ education costs.

Four in 10 generation Y households would be in immediate financial trouble if a primary wage earner were to die.

Living with your parents for now? Life insurance means you could leave them with more than your student loan if something unexpected were to happen to you. Or you could consider designating a charity as your beneficiary, to leave the world a little better than you found it.

Is your mortgage covered?

Your bank will likely offer insurance when you are negotiating your mortgage, and that can be a good option. You could also think about a term insurance policy that mirrors the length of the mortgage. The premiums may be cheaper, and the benefit remains constant throughout the term.

Your premiums are at their lowest now

Life insurance premiums are low and more affordable when you are young and healthy. If you develop an illness in a few years, your premiums may be much higher, or you may be denied coverage altogether. Getting in on the ground floor now – buying coverage sooner rather than later – could save you money over the long run.

The earlier you buy life insurance the lower your premiums will be.

Term life insurance is affordable

The least costly type of life insurance is term insurance, and is defined by the Canadian Life and Health Insurance Association as a type of life insurance that provides coverage for a set period of time (the term). Most term insurance plans will automatically renew at a higher premium when the term expires.

This is a popular product, as it offers the coverage you need when you need it, with premiums usually staying the same throughout the term – only increasing if you renew for another term.

So if you buy a 20-year policy when you’re 25, you’ll still be paying that low premium until you’re 45 (using the example of a 20-year term).

While millennials certainly face some challenges, this is one case when being young is a big financial benefit.

 

1 Brent Jang, Greater Toronto price gains preserve Canada’s housing boom, (The Globe and Mail, Nov. 15, 2016), http://www.theglobeandmail.com/real-estate/the-market/greater-toronto-price-gains-preserve-housing-boom/article32866316/

2 Joe Pinsker, Canadian Millennials Winning, (The Atlantic, Jan. 11, 2016), http://www.theatlantic.com/business/archive/2016/01/canadian-millennials-winning/423510/

3 Melissa Leong, Why young adults need (or don’t need) insurance, (Financial Post, July 20, 2013), http://business.financialpost.com/personal-finance/young-money/why-young-adults-need-or-dont-need-insurance