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Recent College Grads: Here's When You Need Life Insurance

“Should I get life insurance in my 20s? Most young people don't need it. But, college graduates and those who meet the following circumstances should strongly consider it.”


If you’re like most students graduating from college, you wake up each day feeling like you have your entire life ahead of you. The absolute last way you plan to spend your hard-earned cash is the purchase of life insurance.

You have much more important ways to spend your newly earned paycheck – happy hour, concerts, travel, adventures with your friends – much more fun and exciting things than life insurance.

In your world, you believe there is plenty of time to ponder life insurance. In fact, you've placed life insurance in the bucket of “something to buy at a later (unspecified) date”.

We get it. Many of us were in your position at one time. However, as our older and wiser selves, we now understand there are some situations and circumstances when a recent college graduate might want to place the purchase of life insurance on their ‘to do’ list.

If you're wondering "should I get life insurance in my 20s?' then we've got answers for you.

recent college grad at work

THE BENEFITS OF BUYING YOUNG

Most recent college grads and young singles, for that matter, don’t need life insurance because no one depends on them financially.

However, life insurance is, in fact, a worthy purchase for recent college grads – especially those of you who tend to think more long-term when it comes to strategically planning your financial future.

Here are a couple reasons why you might want to give life insurance a second thought at your young age:

#1. The younger and healthier you are, the lower the payments tied to your policy are likely to be.

Why? Life insurance premiums are based on mortality.

With the average American’s life expectancy currently around 80, insurers tend to view people who are young and in good health as being less risky than any other segments of the population. Therefore, they treat them accordingly by offering insurance policies for surprisingly small sums.

#2. You want to protect your ability to purchase life insurance in the future.

Why? Not only is life insurance cheaper to buy when you’re young and healthy, but it’s easier to buy when your body is many decades away from having too much wear and tear.

Reasonably priced life insurance is a much simpler task if you’re under a certain age and haven’t had to deal with any of the medical issues that can make it a lot more difficult to gain access to life insurance down the road.

DEFINITELY CONSIDER LIFE INSURANCE IF EITHER OF THESE 2 THINGS ARE TRUE

There are many reasons why purchasing life insurance upon graduating from college should rank high on your list of financial considerations.

However, there are two instances when it's especially important that you consider this form of financial protection.

  1. If your student loans were cosigned
  2. For those college graduates who had parents co-sign on student loans, a life insurance policy will help protect your parents from being responsible for the loan payments after a death.

  3. If you're married or have kids
  4. College graduates who are already married and have (or are planning on having) children need to have a policy in place that will take care of their loved ones if they die unexpectedly.

If you have the extra funds and meet one of the two above qualifications, you definitely want to think about putting them towards life insurance.

Speaking of funds, your next thought is likely, “How much does life insurance cost?”

cost of life insurance vs the price of coffee

LIFE INSURANCE COSTS LESS THAN YOUR COFFEE HABIT

As noted in the section above, life insurance premiums are usually much less expensive for college graduates than for older people. That's because there are fewer health issues and medical concerns to deal with.

Actual premium amounts of life insurance policies vary depending on the type of policy purchased as well as the age and health of the policyholder. But, most life insurance can be purchased at a very reasonable rate.

Many people hear the word “insurance” and automatically cringe, thinking it will cost an arm and a leg. However, in comparison to other monthly expenses, it's quite easy to come up with the amount of the premiums.

Typically the premiums will range between the price of four gourmet coffee drinks and a tank of gas.

Coffee vs Life Insurance

If you’re a Starbucks lover or coffee fanatic, consider these Starbucks budget blasters provided by The Daily Meal as they relate to the cost of life insurance:

  • Grande Iced Black Tea: $25-30/month
  • A classic, shaken iced tea at Starbucks with nothing added costs around $2.25 each. If you were to order this drink three times a week, that would put you at $6.75 per week and around $25 to $30 per month, without tax.

  • Grande Iced Coffee: $30-35/month
  • A Grande iced coffee with or without milk costs about $2.65. Three visits a week would bring you to around $7.95, which would cost somewhere between $30 and $35 per month without tax.

  • Grande Caffè Latte: $40/month
  • This is a common order that is a little more expensive than the basics. A Grande Caffè Latte will usually cost around $3.45. That means, three visits a week will cost you about $10.35 per week and about $40 per month.

Using our term life insurance multi quote tool, we found that a 21-year-old, non-smoking female can expect to pay as little as $18 per month on a 30-year policy for $250,000.

When you compare the monthly cost of life insurance against many of the expense items you pay without a second thought, it is easy to see how purchasing life insurance is not the budget buster you anticipated.

young adult at first job

I'VE RULED OUT LIFE INSURANCE. NOW WHAT?

We get it – not everyone needs life insurance. There are numerous situations for younger people in which life insurance doesn’t make sense – and that’s okay!

Disability insurance, on the other hand, might be of interest. For example:

  • What would happen if you were sick or injured and unable to work and earn an income?
  • Who would you rely on financially if something like that happened?
  • How long would you be able to meet your financial obligations?

That’s where disability insurance comes in. It will replace a portion of your income if you’re unable to work due to a disabling illness or injury.

Many larger companies and some smaller ones offer some disability coverage to employees through a group plan. Check with your employer to see if such an option exists. In many cases, it’s a bit less expensive to obtain disability coverage through an employer or group plan.

WARNING: Plans secured through an employer or group plan are not portable. You can’t take them with you if you change jobs.

Alternatively, if you believe disability insurance makes sense for you, you can buy a disability insurance policy independently.

Unlike group coverage, privately owned insurance stays with you even when you change jobs. To find out more about disability insurance and if you need coverage here’s help.

FORWARD THINKING

Here’s hoping you will never need the financial comfort provided by a life insurance policy while you’re young.

If your situation dictates a different course based on the pointers provided earlier in this blog, your forward thinking, planning and life insurance purchase will ease the pain of your loved ones during a very difficult time.