Why New Grads Should Consider Life Insurance

life insurance for grads

If you’ve just graduated college and you’re wondering what’s next, your best bet might be getting a life insurance policy as fast as possible. That’s right, forget about hiking across Europe or even that trip to Cancun. First, you need to get a life insurance policy. Think we’re kidding? We’re not.

What is Life Insurance?

First: what is life insurance? Life insurance is a contract between the policyholder (you) and the insurer (the insurance company). A life insurance policy is an agreement that the insurer will pay the beneficiary of the policy (usually a family member) in case the policyholder dies. In return, the policyholder must pay the insurer premiums. Premiums are based on many factors including:

  • Policyholder’s age
  • Health
  • Life expectancy
  • Habits
  • Amount of benefit

Every life insurance policy is different depending on the individual. Generally speaking, there are 2 types of insurance: term life and whole life.

Term Life Insurance 

Term life is more affordable. If you don’t want life insurance as a financial investment but instead simply as a catastrophic safeguard, then term life is the policy for you.

Advantages to getting a term-life policy when you’re young:

  • Extremely low premiums
  • Coverage for desired term
  • High benefits

Whole Life Insurance

Think of a whole life policy not just as a backstop against the unexpected, but an investment as well. Here’s where we weren’t kidding when we said you should grab a life insurance policy as fast as you can.

Most people don’t know that buying a whole life insurance policy is an investment. Most people think that when you’re finished paying off the policy, you won’t see it again until you die. On the contrary, whole life policies grow equity. When you’re finished paying it off, the insurance company refunds your premiums plus interest. And, you still have the benefits. Yes it’s more expensive, but if you lock in a rate when you’re young it can be a great investment.

Advantages to getting a whole-life policy when you’re young:

  • Accumulates cash value
  • Serves as investment
  • Premiums refunded with interest

And this is just scratching the surface. Wait till you hear about other benefits to buying a life insurance policy when you’re young.

How Does Life Insurance Benefit New Grads?

You’ve got your whole life ahead of you and the last thing you want to think about is what happens when you die. If you do stop to think about it, the best life insurance policy you’ll ever have is the one you buy when you’re young. You’re never going to have another chance to get such high coverage at such low rates. 

If you wait until you’re older and see how expensive life insurance can be, you’re going to wish you’d acted sooner. If you wait until you’re middle-aged or just starting a family, you’re going to realize you could have bought life insurance when you were young, and you could have paid it off already.

3 Ways Life Insurance Benefits New Grads

Number 1: Protects Your Loved Ones

For most, life after graduation means getting their own place, living the single life; but not for all. What if you’re the primary wage earner in your family? What if others depend on you? You need life insurance.

If your parents are ill or disabled, if you support your grandparents in their old age, you need life insurance to protect your family. In these cases, a term life policy might be the best choice for you. 

Term life allows you to choose the length of your policy. It gives you high benefits with low premiums. Because you’re young, in many cases you can get a policy for just a few dollars a day. Because you’re young, a medical examination is usually not even necessary. Buying a term life policy when you’re young means low rates and high benefits.

Number 2: Whole Life Policies Offer Many Types of Benefits

If you decide instead to buy a whole life policy when you’re young, you’ll find rates low as well. Why buy a whole life policy over term insurance? Most people don’t know that whole life offers much more than just a death benefit. It’s an investment. Whole life accrues in value over time. It’s like having a savings account paying you interest and a death benefit at the same time.

After you’ve finished paying-off your policy, the insurance company will send you a check refunding your premiums—plus interest. You may think that’s the end of it, but you’re just getting started.

Many life insurance policies offer benefits before you die. If your policy offers living benefits, you can accelerate your death benefits for all kinds of things like: 

  • Medical expenses
  • Cash advances
  • Long-term care

If you’re terminally ill, you can start receiving benefits before you die. You can take out a loan, or even make cash withdrawals. Life insurance policies can be very versatile. They can even pay for final expenses like your funeral so you don’t strap your loved ones with unnecessary expenses when you die.

The best part: You can even use your life insurance policy to pay off your student loans. If something unexpected happens to you, you don’t have to burden your family. You can use your death benefit to pay off your student loans. 

Number 3: Paying Higher Premiums

Sounds crazy. Who would want to pay higher premiums? But if you’re young, paying higher premiums now for your whole life policy means paying it off sooner. But who in their right mind wants to pay higher premiums? 

If you’ve just graduated college, most likely that often means you’re entering the job market and have little to no expenses. Besides potential student loans, chances are this is the best time to pay more and pay off your life insurance policy sooner. 

If you do have financial responsibilities already, some whole life policies even allow you to have more flexible premiums, paying more now than later or vice-versa. If you have the opportunity to pay off your policy sooner, most insurance companies offer a 10-year plan.

The Time Is Now to Buy Your First Insurance Policy

Whether you’re considering a term or whole life policy, there’s no better time to make that investment than when you’re young. At this stage of your life, perhaps term life insurance is the best way to go. Low premiums with high benefits is a great reason to get a term life policy while you’re still young.

Or maybe a whole life policy is the best path for you. There’s no better time than now to start investing in the future, and because you’re still young, rates will be low. Remember: a whole life policy is an investment, and the death benefit lasts your whole life, long after you’ve paid the policy off.

Learn more about life insurance with Sproutt and find your perfect coverage today.

If you have any questions about life insurance companies, contact the corresponding insurance department in the state where you live. Insurance companies must be licensed to do business in your state.

Find a list of state insurance departments at I.I.I., the Insurance Information Institute.

Get an instant online quote for life insurance.