If you've ever read my blog before, you will know like a financial planner, I value life insurance coverage as an integral a part of my clients' financial lives. Before training like a financial advisor, I honestly never gave much thought to life insurance coverage. However, now we all know that it's a valuable tool to assist protect you from certain financial risks.
While I value life insurance like a smart way to financially protect your loved ones, I don't value it for each client; and for the most part I rarely recommend it to my Millennial clients.
What would happen if you weren't around?
Before you can even start to wonder if life insurance is sensible for you (no matter how old you are), you need to feel the morbid procedure for imagining a world without you in it, and just what this means to folks you leave behind.
Yes, lots of people will miss you, maybe many people will rejoice as well as for others, it won't really make a difference in their day-to-day lives. For most Millennials, the main 'risk' to their departure from this world is emotional, and while life insurance coverage can prevent numerous risks, it cannot solve the emotional dilemma of losing a loved one.
I analyze risks within my clients' lives all the time, and for Millennials the largest risks are usually not having enough in emergency savings, an excessive amount of debt or otherwise investing properly. I usually see minimal risks in my Millennial clients that life insurance would solve. There are a few situations, though, where I've discovered myself suggesting life insurance to some Millennial client.
Debt upon death
What transpires with your debts when you die?
During a meeting having a one of my Millennial clients earlier this year, she lamented the truth that she recently lost a buddy in the early age of 26 and just how his death acted like a wake-up demand her to lead fitness. His early departure also led her towards the exercise of wondering what life would be like if she were gone; and she immediately worried about her student education loans.
This client currently has over $120,000 in student loan debt that they is paying off. Her parents are co-signers on all of these loans and should this client pass, her parents would not only suffer the pain of losing a young child however they would also bear the burden of $120,000 in student loan debt that they could leave behind.
Unfortunately, this can be a scenario that lots of Millennials are facing. They have significant student loan debt that would result in a serious burden on their parents whenever they perish suddenly.
Unless this client wins the lottery, her student loan debt represents a danger upon her death for the following 10-15 years, and I suggested she consider a term life policy to pay for this risk. Term life monthly premiums vary by your age, your wellbeing and also the term, however for her situation and also the coverage she needed, she could secure a policy for just $12 a month. As she said to me later, “Shannon that's two less Starbucks lattes I recieve a month, but at least I know it will protect my parents should something occur to me.”
If you're curious just how much it would set you back, find out here.
The Typical Life Insurance Needs
I think many people understand that there is a life insurance need when they undergo life events like marriage and achieving children; I typically advise Millennial clients during these situations to ensure they're protecting themselves with life insurance.
In my opinion, getting married doesn't instantly cause you to an existence insurance candidate. I've clients who are married with minimal debts and substantial savings that feel prepared should one of these die suddenly, so the extra monthly cost of life insurance coverage doesn't make sense.
However, I actually do believe that once you possess a child, you need to think about protecting that child should something happen to you. Even though you possess a significant amount saved, you don't know what added expenses could arise whenever you pass and also you do not want your partner to wash out their savings to cover it. Probably the surviving parent won't be able revisit work, or your assets aren't as significant as you assumed, and also the nest egg depletes faster than anticipated.
When I worked at Merrill Lynch, another advisor's client passed without having life insurance, leaving the surviving spouse and 2 small children with minimal cash and three real estate properties. It had been going to take her time to sell those properties for cash and she or he didn't know what she'd live from in the interim.
The younger and healthier you're whenever you apply for term life insurance, the lower your payments. However, it just makes sense to buy term life insurance whenever you actually have people who are financially dependent on you to definitely settle the debts.
Financial dependence could exist when:
- You're married as well as your spouse depends on your earnings to assist with paying the bills or reducing debts like a mortgage
- You have children as well as your spouse can't afford to deal with them and cover all expenses (consider college!) without you around
- You have significant co-signed student debt that might be left for your loved ones (likely your parents – don't do that for them)
None people has a crystal ball and rather than assume all your family members may have enough assets to keep them comfortable without you around, life insurance can ensure that it's not necessary to be worried about that scenario.
If you are always not sure if life insurance is sensible for you personally, here is a great calculator to help you with the exercise.
Do you have risks?
As a financial planner dealing with mostly Millennials, I think the greatest risks you need to protect against are the financial well-being of the partner or child and debts upon death. If your death would produce a substantial cash drain for someone they love, then you should consider term life insurance as a potential means to fix ease those risks.
Otherwise, I would suggest by using their additional monthly payment toward other life goals in order to enjoy an additional latte every so often.