Selling Life Insurance: Can Youth Be An Advantage?

Life insurance is often associated with older people with more financial responsibilities, such as mortgages, children, or other debts. However, young adults in their 20s can also benefit from purchasing life insurance. It is significantly cheaper to buy life insurance at a younger age, and it can provide a safety net for loved ones and beneficiaries in the event of premature death. Life insurance can also help cover final expenses and other debts, ensuring they don't become a burden for family members or loved ones. Additionally, some life insurance policies can serve as tax-advantaged savings vehicles, providing benefits both during and after the policyholder's lifetime.

Pros and cons of selling life insurance at 20

There are several advantages and disadvantages to selling life insurance at 20 years old. Here are some points to consider:

Pros:

• Lower premiums for younger customers: Life insurance premiums are cheaper when you buy your policy at a younger age. This means a 20-year-old can benefit from lower premiums compared to purchasing insurance later in life.
• Accumulated cash value: Permanent life insurance policies offer the opportunity to accumulate savings in a cash value account. Starting a policy at 20 gives more time for these savings to grow, potentially resulting in significant value later in life.
• Financial protection: Life insurance provides financial protection for young adults who may have student loans, mortgages, or other debts. In the event of their untimely death, life insurance can ensure that these financial burdens are not passed on to loved ones or co-signers.
• Long-term coverage: Buying life insurance at 20 can provide death benefit coverage for a longer period of life. This can be beneficial if the policyholder starts a family or accumulates more financial responsibilities over time.

Cons:

• Longer payment period: While premiums are lower at a younger age, the policyholder may have to pay these premiums for a longer period of time, potentially throughout their entire life or until an advanced age.
• Difficulty paying premiums: Young adults starting their careers may struggle to keep up with premium payments, especially for permanent coverage, which tends to be more expensive.
• Perceived lack of need: A 20-year-old may not feel the immediate need for life insurance, especially if they are single, have no financial dependents, and are not concerned about leaving a financial legacy.
• Opportunity cost: The money spent on insurance premiums could potentially be invested elsewhere, such as in the stock market or other financial ventures, which may offer a better return on investment.

How to find the right life insurance policy

A 20-year-old can certainly make a career out of selling life insurance. In fact, buying life insurance at a young age has its advantages, as premiums are cheaper when the policy is purchased at a younger age.

Now, here's a detailed guide on how to find the right life insurance policy:

Assess your life insurance goals:

Your goals will depend on your personal circumstances and priorities. If your primary goal is to safeguard your family's financial security, a term insurance plan is a good option, as it offers high coverage at affordable rates. If you're planning for future expenses like your child's education or buying a home, consider investing in a unit-linked insurance plan. For those approaching retirement, a retirement plan can ensure regular income for everyday expenses.

Calculate the optimal insurance cover:

Financial advisors often suggest that your life insurance cover should be around ten to fifteen times your annual income. However, there are other factors to consider, such as outstanding debts, future education costs for your children, and maintaining your family's current lifestyle in the event of your absence. Calculate these expenses and subtract any liquid assets like cash or investments to determine an adequate cover.

Determine the premium and find the best deal:

Use online premium calculators to find out how much you'll need to pay for your desired insurance amount. Then, compare different plans to find the one that offers the highest coverage within your budget.

Select the correct policy term:

The ideal policy term is the number of years your family will be financially dependent on you. A good rule of thumb is to subtract your current age from the age at which you expect your income to stop or wish to accomplish a specific life goal.

Choose a reputable life insurance provider:

Opt for a life insurance company with a strong Claim Settlement Ratio (CSR). In India, the Insurance Regulatory and Development Authority (IRDAI) website provides updated CSR information. A company with a CSR of over 95% for consecutive years is generally considered reliable.

Be transparent with your life insurance provider:

Disclose any relevant information, such as tobacco or alcohol consumption, hazardous work, existing illnesses, or family medical history. These factors impact your risk profile, and providing accurate details is crucial to avoid future claim rejections.

Read the policy document carefully:

Before finalizing, ensure you understand all the terms and conditions, including the lock-in period and any circumstances that may invalidate the claim.

Start early:

Life insurance premiums are lower when you're younger, so buying a policy early can save you money. You can start with lower coverage and add riders as your income increases over time.

Choose a comprehensive plan with appropriate riders:

Consider adding riders like Critical Illness, Accidental Death Benefit, Permanent Disability, and Terminal Illness coverage. These riders provide additional financial protection in the event of serious illnesses, accidents, or terminal diseases, and can help safeguard your family's future.

Regularly review your life insurance needs:

As your life evolves with age, marriage, or children, your financial goals may change. Periodically review and adjust your cover to account for these life changes and to keep up with inflation.

Remember, life insurance is an essential financial tool, and by following these steps and conducting thorough research, you can make an informed decision to find the best policy for your needs.

Whole life insurance vs term life insurance

Life insurance is typically divided into two categories: term and whole life. However, there are many different kinds of insurance products available to consumers, as each type of insurance has its own pros and cons, and different products suit different needs. Here is a detailed comparison between term life insurance and whole life insurance:

Term Life Insurance

Term life insurance is designed to cover a specific set of events over a defined period, usually between 10 and 30 years. If the policyholder passes away during the specified period, the beneficiary will receive a payout. Term life insurance usually costs less because there is only a payout if the policyholder dies during the term. It is also customizable, allowing you to choose your term based on your unique situation, which can reduce costs in the long run. This type of insurance is popular for young families because of the lower premiums upfront.

The pros of term life insurance include:

• It is usually cheaper than whole life insurance.
• It is customizable and specific to your timeline.
• It is easier to understand, apply for, and get approved.

The cons of term life insurance include:

• If you outlive the term length, your coverage will end, and you won't receive any benefits.
• It does not cover you for your entire lifetime.
• The policy does not accumulate cash value like an investment account.
• It can be more difficult to obtain coverage after the policy expires, depending on health and age.

Whole Life Insurance

Whole life insurance provides coverage for your entire life cycle. It tends to be more expensive because it serves as an investment. This investment, known as the cash value, can grow throughout your lifetime tax-free. The premiums remain the same throughout the course of your life, and the death benefit is certain. The cash value grows in a tax-deferred account at a secured rate. This type of insurance is popular for those looking to maximize their financial potential.

The pros of whole life insurance include:

• The premiums remain the same.
• The payout is guaranteed (subject to limitations and exclusions).
• The value of the plan grows at a constant rate.
• Borrowing against the policy requires no credit check.
• Premiums are predictable.

The cons of whole life insurance include:

• It is typically more expensive than term life insurance.
• You cannot choose the length of the policy.
• The complexity of the policy makes it more difficult to evaluate.
• Borrowing against the cash value carries interest.
• Other savings vehicles may earn greater returns.

The choice between term and whole life insurance depends on your financial goals, individual needs, and financial circumstances. Term life insurance is generally sufficient for most people, especially those on a budget who only want coverage for a specific period. Whole life insurance is better suited for those who can afford higher premiums and want lifelong coverage and the opportunity to build savings for the future.

You can also have more than one life insurance policy, combining whole life and term life insurance to meet both short-term and long-term needs.

Life insurance for 20-year-olds with debt

Life insurance is often overlooked by 20-year-olds, but it can be a smart financial decision, especially for those with debt. While it may seem unnecessary at a young age, there are several benefits to getting life insurance early.

Firstly, it is significantly cheaper to buy life insurance when you are young and healthy. The premiums are lower, and you can lock in this rate for the duration of the policy. This means that even if your health deteriorates later in life, you will still benefit from lower insurance costs.

Secondly, life insurance provides a safety net for your loved ones if you pass away prematurely. The death benefit payout can help cover final expenses and any outstanding debts, ensuring that your loved ones are not burdened financially. This is especially important if you have large debt obligations, such as student loans or a mortgage, that you would not want passed on to someone else.

When considering life insurance, it is essential to understand the two main types: term life insurance and whole life insurance. Term life insurance covers a specific set of events over a defined period and is generally more affordable for young people. On the other hand, whole life insurance offers a death benefit with no expiration date but tends to be more expensive, with premiums often costing hundreds of dollars per month.

When deciding whether to purchase life insurance, 20-year-olds with debt should carefully consider their financial situation and future goals. While it can provide peace of mind and financial protection, there are also challenges associated with keeping up with premium payments, especially for young adults starting their careers. Additionally, if you are single without any dependents or significant debt, you may not need life insurance at this stage of your life.

In conclusion, while the decision to purchase life insurance is a personal one, 20-year-olds with debt should be aware of the potential benefits and drawbacks. By weighing the advantages of lower premiums and financial protection against the challenges of long-term premium payments, young adults can make an informed decision about whether life insurance aligns with their financial goals and priorities.

Life insurance for 20-year-olds with health issues

Life insurance is often overlooked by 20-year-olds, but it can be a sensible option to consider, especially if you have health issues. While you may believe that only older couples with children and homes need life insurance, it can be a mistake to assume this. Life insurance can provide a safety net for your loved ones and beneficiaries if you pass away prematurely.

There are several benefits to buying life insurance at a young age. Firstly, it is cheaper to buy life insurance when you are young, and good health can also result in lower insurance costs. Secondly, life insurance can provide coverage for a longer period of your life. Additionally, you may be able to increase your coverage later without undergoing a new medical exam, which can be beneficial if you have a family history of developing serious medical conditions. Furthermore, life insurance can help protect your loved ones from inheriting your debts in the unfortunate event of your premature death.

However, there are also some potential drawbacks to consider. Young adults may struggle to keep up with premium payments, especially if they are just starting their careers. You may also find that you have to pay premiums for a longer period of time, and there is an opportunity cost to consider, as the money spent on premiums could have been invested elsewhere.

When deciding whether to purchase life insurance, it is essential to evaluate your individual circumstances. If you have health issues, life insurance can provide peace of mind and financial protection for your loved ones. It is worth noting that some insurance companies offer no-medical-exam policies, which may be appealing if you have health concerns.

Some recommended life insurance companies for young adults include Brighthouse Financial, Legal & General America, and Transamerica. These companies offer competitive rates, instant-decision applications, and flexible options to meet your needs.

In conclusion, while life insurance may not be a priority for all 20-year-olds, it is worth considering, especially if you have health issues or financial dependents. By purchasing life insurance, you can ensure that your loved ones will be financially protected in the event of your premature death.

Frequently asked questions