I joke that life insurance personifies age discrimination, but there’s no denying the fact that the premium increases with age. But age isn’t the only element that increases the premium; health issues can increase the premium more significantly than age, and if severe enough, could even preclude coverage at any price. Still, there’s no question that younger equals cheaper.
The problem is that life insurance is the furthest thing from the minds of most young people, for several reasons. First, it’s BORE-ING! No double digit returns here. Also, most people in their twenties haven’t come to grips with their own mortality. Sure, intellectually they understand they will die, they just think that day is far in the future. Lastly, most of them feel that if they have no dependents, why should they waste their hard earned money on life insurance?
The interesting thing is that those are all valid reasons. There’s no denying it’s boring, especially in contrast to some of the alternatives. Only a slim minority will die young; half will live to life expectancy (by definition). And with no one dependent on their income (other than themselves), no one would be hurt financially should they meet an early demise.
That being said, why would a young, single, independent person buy life insurance? The answer is because, just as tomorrow is promised to none of us, neither is our health, and hence our insurability. This point was driven home recently when one of my wife’s best friend’s son was diagnosed with cancer at age 30.
The good news is that it was caught early, and the prognosis is good. The bad news is that he is currently uninsurable. How does one plan for a family when uninsurable? He may become insurable at some point in the future, but that’s not a guarantee. How much simpler would his life had been had he procured a policy upon his graduation?
This is where we as parents have to offer our (unsolicited) advice. Point out to them that not only is it significantly cheaper (the whole life premium for a 30 year old is about a third greater than that of a 22 year old), but also that there is very little downside. Sure, they may be able to dine out a couple of times less a month, but that’s about it. Surely that beats being caught in this young man’s predicament.
Better still, buy it for them when they are born, or soon thereafter. An even better idea is to have the grandparents buy it for them.
More than occasionally, this provokes the response “But the odds of that happening are very small.” (I find it ironic that this response often comes from people who play the lottery.) Of course the odds are slim! If the event was likely, the insurance would be unaffordable. But the more insurance procured while young, the less will have to be purchased later, when it is needed and when it is more expensive. And, depending on age and health, potentially much more expensive.