Benefits of Buying Whole Life Insurance While You're Young

When you’re young, a host of opportunities are open to you. As a young adult, you set a course for where you think you want to be later in life. That might mean choosing a career path, a community to call home, a life partner, and when (and whether) to have children. You also have a rare opportunity to set aside a little extra each month to provide financial security in the future. While people can start saving at any time of life, young people have more time for their investments to grow, which can make an enormous difference on the return they ultimately see.

What is whole life insurance?

Whole life insurance is a form of permanent life insurance (as opposed to term life, which remains in effect only for a specified number of years) that builds cash value over time. Each time you pay the policy premium, the insurance company sets aside a portion of it and lets it grow. The insurance company may also add dividend payments (which are not guaranteed) to the cash value of the policy. In these ways, the policy’s cash value builds over time. This cash value typically grows on a tax-free basis, and it’s also possible to withdraw funds from it without incurring additional taxes. Alternatively, you can use this value to increase the policy’s death benefit or to cover the policy’s premiums later in life, when you’re earning capacity tends to decline.

Why should I consider whole life insurance when I’m young?

Young people are in a position to get the greatest possible value out of a whole life insurance policy. This is the case for two reasons: low, level premiums and long-term growth. Together, these can add up to a significant amount of coverage and return on your premiums.

Low, Level Premiums

Whether you’re looking at a term or permanent policy, life insurance for young adults is much more affordable than life insurance for older people. When you purchase a permanent life policy while your premiums are relatively low, you can continue to enjoy these low premiums throughout your lifetime! Even if life insurance isn’t a priority for you right now, this may save money in your budget when the time comes that you feel a need to have a death benefit to protect your children or others who will come to depend on your income.

Life insurance premium estimates by Policygenius illustrate the power of purchasing a whole life policy while you’re young. These indicate that a whole life insurance policy for a 30-year-old healthy, nonsmoking male costs about 40% more than it does for a similar applicant at age 20. At age 40, even if this person continues to be in excellent health, his monthly premium will be more than double the what he would have paid if he’d bought the policy at age 20.

Long-Term Growth

Unlike a term life policy, which provides no benefit until your death, a whole life policy builds value over time. If you start in your 20s, this can amount to a substantial sum that can help you meet emergency expenses later in life or provide additional security in your retirement. While you may be tempted to put off saving until you’re earning more and more stable in your career, it’s important to remember that permanent life insurance will only increase in cost over time. So, a little extra sacrifice right now, when your financial needs are likely more modest, can provide a lot of financial security and peace of mind later on, when you’ll probably have more demands on your budget.

As a young adult, you have an opportunity to shape your future that will never come again. Purchasing whole life insurance now can help you achieve financial peace of mind. ELCO Mutual offers a variety of whole life policies to meet our clients’ needs. For more information about life insurance and annuities, subscribe to our blog!