Is life insurance a smart investment for millennials?


Within the landscape of personal finance, millennials may find themselves navigating a score of different options to secure their financial future. They’re a generation known for embracing change and redefining traditional norms – including their approach to investments. One topic that often sparks debate is the role of life insurance in a millennial’s financial portfolio.

A millennial is anyone born between 1981 and 1996. Millennials within this range may be approaching a variety of different milestones in life, but many, if they haven’t already, may be starting to think about their financial future. Life insurance is one of many options, but is it a smart investment?

Why buy life insurance as a millennial?

In 2024, a millennial is anyone ages 28 to 43. Within this age range, millennials may be getting married, having children, buying their first homes, starting businesses, etc. – all milestones worthy of life insurance protection. To put it simply, life insurance isn’t a purchase associated with a specific generation or a specific age. It’s a policy best purchased when the prospective policyholder has something worth protecting, or someone. Sometimes, this is an investment, like a home or business, but most of the time it’s a spouse or dependent(s).

We advise purchasing life insurance younger because life insurance is cheaper the younger you buy it, but in the end it’s something you should get when you need it, not just because you’ve reached a certain age. For example, purchasing life insurance to help pay off their mortgage for their family in the event of their unexpected passing is a no-brainer – and that can happen at 25, 30, 35, or even 40.

What reasons are there to purchase life insurance as a millennial?

The average age for purchasing a home in America in 2022 is 36, where the average age for purchasing a home in 2021 is 33. Millennials, being between 28 to 43, fall just in that range. Protecting your family from having to pay off your mortgage in your absence is just one reason why a millennial might buy life insurance, but it tends to be one of the more common incentives.

*Source from the National Association of Realtors (NAR).

Here’s some other reasons why a millennial might want to purchase life insurance:

  • To provide financial support for spouses, children, or other dependents.
  • To help cover financial obligations like loans, mortgages, or other debts.
  • To lock in lower premiums at a younger age.
  • To use as a tool for business continuation planning or to fund a buy-sell agreement.
  • To replace lost income, ensuring family members can maintain their standard of living.
  • To cover funeral and burial expenses for family members.
  • To provide liquidity in covering estate taxes or ensuring an inheritance for beneficiaries.
  • To ensure coverage before developing health issues at a later age.
  • For a sense of security – knowing loved ones are financially protected.

Like any individual in any age group, it’s essential for millennials to carefully assess their current needs or even work with an agent to determine if life insurance is a good choice for them.

What type of life insurance should a millennial buy?

It depends on the individual, really. There’s no clearcut answer, and with the range there is between the youngest and oldest millennials, it’s hard to say given that you could be at any one stage of life.

Some considerations for millennials buying life insurance include:

Current Financial Situation

  • Millennials with tight budgets may lean towards term life for cost-effectiveness.

Long-Term Goals

  • Consider whether lifelong coverage and a cash value component align with long-term financial goals.

Financial Responsibilities

  • Assess current and future financial obligations to determine the necessary coverage duration.

Investment Preferences

  • Decide whether the insurance policy should serve purely as protection or also as an investment/savings tool.

Flexibility Needs

  • Evaluate the need for flexibility in adjusting coverage based on life changes.

What’s the difference between term and permanent life insurance? In short, permanent life insurance offers lifelong coverage and usually features a cash value component, which accumulates with time. Permanent life insurance may be the better option for those who want to focus on estate planning and legacy, as well as a permanent solution for dependents who may need long-term care.

Term life insurance is better for the everyday millennial, or just someone who needs coverage over a set term (such as until kids are adults and financially independent, until mortgage or debts are paid off, and so on) and is often the more inexpensive option.

Financial Planning with AHI Group

As millennials, securing a robust financial future requires a nuanced understanding of the choices available. AHI Group’s expertise in providing comprehensive insurance solutions prompts an exploration into the distinctions between term and permanent life insurance. The focus here is on cost-effective alternatives that resonate with the budget-conscious approach of this generation. Additionally, delving into the integration of life insurance into a broader financial strategy is crucial. AHI Group’s insights into coverage, flexibility, and long-term planning can offer valuable perspectives tailored for millennials. Give us a call today to start the conversation.