5 Things Millennials Should Know About Life Insurance

By Liana Corwin, Ladder

Millennials may get a bad rap for being carefree and spending too much on their daily lattés, but the reality is that the generation of avocado toast is growing up and they’re getting serious about their finances.

As anyone who has invested time into their financial picture knows, protecting your financial life is just as important as building it. And that’s where life insurance from Ladder comes in.

Number 1: Why Should I Think About Life Insurance?

Designed to be there when you are not, life insurance provides financial stability for the people who depend on you - whether that’s your kids, your partner, your spouse, or maybe even your parents.

Think of it like car insurance. You pay a monthly premium based on factors like your driving history and the make and model of your car, and then you hope you’ll never need to use it, but it’s there for you in case you do.

Similarly, with life insurance, you pay a monthly premium in exchange for coverage that you hope your loved ones will never need to use. But if you pass away while your policy is active, your beneficiaries will receive the value (i.e. the face amount of your policy) of the coverage that you purchased.

Number 2: Am I Too Young To Apply?

On average, the younger you are, the lower your premiums are going to be. That’s because life insurance is fundamentally a game of probabilities. A 25-year-old will likely outlive a 20-year term policy. A 65-year-old? There’s a possibility they may not, given average life expectancy. You can expect life insurance to be priced accordingly.

You aren’t throwing money away by getting a life insurance policy at 25. You’re locking in a significantly lower premium that will come in handy as the need for that policy grows. 

Marriage, kids, and a mortgage might not be in the cards for everyone, but if you wait until they appear, you may pay more for life insurance. That’s all the more reason to get life insurance sooner rather than later. Think of it as insurance against the rising cost of insurance.

Then there’s your health. As your health risks rise with your age, so too will your premiums. Again, it’s a straightforward risk/reward measurement for the policy underwriter. If you’re less likely to cash in your policy, you’ll be rewarded with a significant discount.

Number 3: Should I Get Term or Perm Insurance?

Term life insurance offers millennials a straightforward, focused proposition – you pay a regular amount for coverage over a set period of time (the “term”), and if you die during that term, the insurer pays the coverage amount for all valid claims. That’s it, by design.

Permanent life insurance offers coverage for the lifetime of the customer. The most well-known examples of permanent life insurance are probably whole life and universal life.

The cost of term life insurance can be up to 10x cheaper than other types of life insurance, such as whole life. That’s because you're only paying for the years that you need it. The monthly premiums are fixed so you don't have to worry about price increases either.

While perm may offer an investment component of some kind, “buy-term-and-invest-the-difference” is a financial strategy where a customer buys term life insurance, then saves or invests the difference between the payment for that term life product and what it would have cost for a permanent life insurance product that provides the same coverage amount. Compared to a permanent life insurance product like whole life, buy-term-and-invest-the-difference strategies may have higher returns and you control the investment.

Number 4: How Much Coverage Should I Get?

The coverage and term length that you should get will always depend on your specific needs. There is no one size fits all answer - one family's needs will differ from another. There are, however, a few rules of thumb that may be helpful for you when determining how much coverage to get and for how many years.

Big picture: consider how much financial support you’d like to provide for your beneficiaries and how much debt you have. Then, subtract your savings and existing life insurance. The best way to answer this question for your personal situation is to take a few minutes to use an insurance calculator.

Number 5: How Do I Save Money on My Policy?

There are few places where planning for the future can be as complicated as getting life insurance. Planning for the amount of coverage you’ll need at 45 is pretty difficult when you’re only 25. That’s where flexible coverage comes in.

Simply put, flexible insurance gives you the power to make sure you always have the right amount of coverage—not too much, not too little. Traditional policies require that you cancel and reapply to reduce your coverage. This is an important point. If you sign up for a 20- or 30-year term, don’t you expect things to change along the way?

Ladder was designed to fit into your life, not the other way around. That’s why it offers the ability to change your coverage any time you want, as many times as you want, with no fees to do so - something that’s pretty much unheard of from other providers. Whether you’re applying to ladder up or ladder down with just a few clicks of your mouse or taps in the app, flexible coverage saves you money. When it comes to laddering down, it’s immediate. You can decrease coverage—reducing the money you spend on it—with the click of a button. And the easier it is, the less likely you are to procrastinate.

Even in the case of laddering up, flexible coverage saves you money. Think of it this way: If you were buying a 20-year term life insurance policy, and you only had one opportunity to pick your coverage, what would you do? Applying for life insurance is all about preparation, so would you want to be over-prepared with too much coverage or under-prepared with too little?

*About the Author

Liana Corwin is the Director of Communications and Editor of the Financial Literacy Blog at Ladder, an award-winning insurtech that’s using technology to make life insurance smart, easy, and affordable. Passionate about helping consumers, Liana has spent nearly a decade working with brands that solve hard problems and make consumer experiences delightful.