Five reasons to buy life insurance in your 20s.

Five reasons to buy life insurance in your 20s.

Whether you’ve just left the parental nest or have been independent for a few years, the 20-something years are a time for building foundations for your financial life. Part of that may mean thinking about life insurance. In the same way you look after your possessions and vehicle, it makes sense to look after your ability to earn money and pay your way. 

Here we look at some of the key reasons to get life insurance in your 20s:

Reason #1: Maintain your current lifestyle.  

Your car, phone, streaming channels, clothes, nights out and all the things that keep your life going depend on money coming in. So what happens when your income goes away, because you’re sick or injured for an extended period?  This risk can be balanced by a type of life insurance called Income protection cover. With Fidelity Life, up to 75% of your gross annual income can be covered if ill-health leaves you unable to work for quite a while. Having this sort of cover can help protect your ongoing standard of living.

 

Reason #2: Stay flatting with friends.

Once you’ve left home to live with friends or a partner, you may not want to move back in with your parents. But what if you can’t pay your share of the rent?  Every year in New Zealand, thousands of people have an illness or accident that prevents them from working for three months or more*. How would that scenario unfold for you? As with reason #1, Income protection cover might be a way to help protect your ability to pay your way and maintain your independence. And it could cost less than you think. Here’s an example to consider:

How much does Income protection cover cost?

Madi is 25 and works as an account exec for a marketing agency on an annual salary of $50,000. Her monthly income (before tax) is $4,167. Madi decides to take out income protection cover to help with day-to-day living costs if she can’t work for an extended period due to sickness or injury. Madi decides to insure half her monthly income and chooses to receive payment for up to 2-years after having her claim accepted. She also gets to decide how long she could wait before receiving payment. Her options are from 2-weeks to 2-years. This decision impacts how much she will pay for cover.

50% of Madi’s gross monthly income

How long to wait to receive payment?

Fortnightly cost*

 

$2,083

2-weeks

$24.52 

$2,083

4-weeks

$13.27

$2,083

8-weeks

$11.13

$2,083

13-weeks

$8.23

Because Madi doesn’t have savings, she decides she could get by for 4-weeks without her income. So Madi’s income protection costs $13.27  per fortnight and will increase each year with age.

This scenario is an indication of the cost of Fidelity Life Income protection cover. There are additional benefits and options that might be useful for you that can be added for an extra cost. We recommend you discuss your needs in more detail with a financial adviser who can provide you with advice on what cover is right for you.

The costs above are:

  • Estimates only and are not promised.
  • For a female non-smoker without health risks or risks associated with family history or pastimes. Your costs will be more if you have any of these.
  • What you would pay in the first year of your policy if you took it out on 3-March 2022.
  • These costs are likely to change and should not be used as an estimate of what you may pay in future years.

 

Reason #3. Make sure your savings aren’t wiped out.

If a family member left you a nest egg or you’ve been able to save money, you may not want to see it vanish because you can’t support yourself. As we’ve mentioned above, having Income protection cover can help to preserve your personal savings if you’re not able to work for a while because you’re sick or injured.

 

Reason #4. Because you’re in a serious relationship. 

Deciding to get married or live with a partner can inspire you to think about their future if an unfortunate event took you out of the picture. Becoming a couple can result in both of you getting some kind of life insurance. But what is the best life insurance for young couples? The short answer it depends on your situation and what you’re looking to protect.

A solution could be Life cover that pays a lump sum to the person named in your policy if you die. It also pays the Life cover out earlier if you’re diagnosed with a terminal illness and have been given less than 12-months to live.

It can be comforting to know that your favourite person in the world will be looked after financially if you’re no longer around to contribute to the household income. Find out more about Life cover when you get married or move in with a partner.  

 

Reason #5: Because you want to protect your future self.  

Health problems generally increase with age, so starting Life cover while you’re young, healthy and fit may have an upside. It could mean you have a greater chance of being covered for health problems you might get in the future. At certain ages, or when you experience certain life events like getting married and having a baby, Life cover provides you with opportunities to increase your level of cover (to a certain level) without the need for additional health information.

 

To get the full picture, talk to a financial adviser.

To work out when to get life insurance and what type of cover makes sense, we recommend talking to a financial adviser. Financial advisers know all about life insurance for young people and can give you a recommendation on what’s right for you. Find a financial adviser.

 

DISCLAIMER: The information contained in this article is a summary of the key points of the insurance cover(s) mentioned and is general in nature. This article does not constitute a financial advice service. All covers are subject to the definitions, standard exclusions/limitations, terms and conditions contained in the full policy documentation which is available from Fidelity Life or your financial adviser who holds a Distribution Agreement with Fidelity Life. All applications for cover are subject to underwriting criteria.

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*Mindthegap.co.nz – ‘How long could you survive without an income?’ 2015