It’s safe to say no millennial wants to think about life insurance … because no one wants to think about life insurance. If you’re in your 20s or 30s, shopping for something that’ll only get used if you die is a real bummer. That’s not an invite to spend the rest of your day dreaming about artisanal coffee or hating on napkins. If anyone needs life insurance, YOLO-ing millennial, it’s you. To help you understand why (and get the best coverage for you), here are 50 things millennials should know about life insurance.
1. Your friends are buying it …
Seriously. A 2016 Life Insurance Market and Research Association (LIMRA) study found 70% of millennials own some type of policy.
2. … but there’s a good chance they don’t have enough coverage.
LIMRA found final expenses were the most common reason millennials were buying life insurance. Thing is …
3. Life insurance is designed to cover more than just funeral expenses.
Its overarching goal is to provide a financial safety net for your dependents in the event of your untimely death. As such …
4. The ‘right’ coverage varies.
A solid life insurance policy accounts for your income, assets, major debts, and future obligations (like sending your kid to college), among other things. You can use our handy life insurance calculator to pin down how much coverage you actually need. Keep in mind …
5. There is such a thing as too much protection.
You can easily end up with more life insurance than you need or reasonably afford. That’s at least partially due to the fact that …
6. There are a plethora of policies out there.
Term life insurance covers you for a set period of time; whole life insurance covers you for your whole life. And then there’s variable life insurance, universal life insurance, variable universal life insurance and more. But don’t stop reading just yet because …
7. You probably just need a term life insurance policy.
Remember when we said you can have too much coverage? Well, whole life insurance is basically for rich people who have already maxed out other tax-deferred accounts and need another tool to manage their estate.
8. Whole life insurance is expensive.
Permanent life insurance policies cost four to ten times more than term life insurance. A $100,000 whole life policy, for instance, costs around $89 a month or $1,030 a year, while a $500,000 policy costs around $420 a month or $4,800.
9. Life insurance is more affordable than you think.
Per a joint survey from the LIFE Foundation and LIMRA, people guessed the cost of a 20-year level term life insurance policy for a healthy 30-year-old to be $400 a year for $100,000 coverage. In fact, it costs around $120 or about $9 per month.
10. Now’s the time to buy.
OK, so you’re probably thinking “you’re an insurance marketplace. Of course, you’re telling me to buy life insurance!” But here’s the thing: Unless you’re seriously unhealthy and planning a lifestyle change, life insurance will never be cheaper for you than it is right now.
11. Seriously, waiting literally costs you.
Not-so-fun fact: Life insurance premiums increase by an average of 8% to 10% every year you put off buying it.
12. Life insurance isn’t just for people with dependents.
If you’re a lone wolf without any cosigned debts, sure, a policy isn’t pressing. But if, say, a parent’s or other loved one’s name is on your mortgage or private student loan, you might want to consider a policy to help repay the debt if you die.
13. Getting life insurance solely through an employer has serious drawbacks.
For starters, the coverage is largely inadequate. And, second, it’s contingent on your employment. You can’t take it with you if you switch jobs.
14. Age isn’t the only factor used to set your rates.
Life insurance premiums are also based on your health (usually assessed during a medical exam), your driving records, your habits, your hobbies and more.
15. Risky habits and hobbies will cost you.
We’re talking nitty-gritty here, but what an insurer is really doing when setting your premiums (known formally as underwriting) is assessing how likely you are to die during the policy term. (Charmed, I’m sure.) That means risky hobbies, like skydiving, or bad health habits, like smoking, often lead to higher rates.
16. It pays to shop around.
Having said that, some insurers are less risk-averse than others. For instance, there are life insurance companies that are better for former smokers than others. And, hey! …
17. There are insurers known for providing good deals to millennials.
You can find a list of them right here.
18. Insurance companies are rated.
If you’re wondering about insurers in general, there are sort of metrics you can look to vet their customer service. That includes their A.M. Best scores, Better Business Bureau ratings and J.D. Power ratings.
19. The application process is … involved.
We’re not going to sugarcoat it: There are a few steps between applying for a policy and getting it approved (or in-force, as they say in insurer-speak). The big one is that aforementioned medical exam, but first …
20. You’ll need to do a phone interview.
Yes, even if you filled out an application online. It gives the insurer the opportunity to get any additional information they need to write the policy.
21. The phoner takes about 30 minutes.
22. You don’t have to take a medical exam …
There are policies out there that let you skip it, namely simplified issue life insurance. And a few insurers offer what’s known as accelerated underwriting.
23. Simplified issue life insurance is probably not for you.
Simplified life insurance is more expensive, because you’re skipping the step that lets insurers assess how much of a chance they’re taking on you. And it’s got coverage limitations. So, unless you’ve got serious health issues, you’re better off looking into accelerated underwriting or taking the medical exam.
24. The medical exam isn’t as bad as it sounds.
It’s a pretty standard physical, plus they’ll probably take a urine sample and some blood. The whole process takes about 30 minutes and most insurers even send the tech to you. You can find a full explainer on the medical exam here.
25. Quitting smoking right before your medical exam won’t change your rates.
You’ll notice in the guide above there are few steps you can take prior to the exam to ensure nothing messes with the results — but ditching cigs isn’t one of them. (Full explainer on why here.)
26. Neither will crash-dieting.
The insurer is looking for at least 12 months of stability before giving your any credit for weight loss. (They’ll actually ask if your weight has gone up or down over the last year.)
27. Getting healthy (or healthier) isn’t a bad idea, though.
Smoking and obesity can lead to a host of health issues. Beyond that, some insurers let you take another exam one or two years after your policy goes into effect. And better results can lead to lower premiums.
28. Some insurers are surprisingly open-minded when it comes to marijuana …
An ongoing nicotine habit nets you an automatic Smoker Classification — which spells bad news for your rates. But marijuana use is more of a toss-up and often hinges on frequency of use. You can find more on the best life insurance companies for pot smokers here.
29. Not so much when it comes to abusing drugs and alcohol.
If you’re currently using addictive drugs, your coverage will be denied. If you have a prior history, the insurer will require you’ve been out of rehab for a certain timeframe — using five years for drug abuse and two years for alcohol abuse — before considering your application.
30. Lying about your health and habits has consequences.
Plus, it’s wrong. But, in case you need an incentive to tell the truth, the whole truth, and nothing but the truth, there’s a good chance a lie will get exposed during underwriting and, if it does, you can get denied coverage or offered a higher premium.
31. It can also come back to haunt you.
If the lie gets discovered after your policy is in-force, the insurer could cancel it. And, in an absolute worst-case scenario, your death benefit — the amount of money a policy pays to the beneficiary if you die — won’t get paid out.
32. Policies come with a contestability period.
Life insurers have a two-year window, starting from the date the policy goes in-force, where they can look back at your application and determine if any fraud was committed. That’s included, well, to prevent fraud.
33. Life insurance companies have a good track record when it comes to paying out.
Having said all that, life insurance is fairly straightforward — and most insurers out there are highly rated, so you shouldn’t avoid shopping for a policy simply because you think the company won’t make good on the claim.
34. You can technically name a pet as your beneficiary.
We mention this because we hear many millennials prefer cats and dogs to children.
35. You can also have more than one beneficiary …
No need to agonize over what child (or pet) to pick.
36. … and change your beneficiary regularly.
Contact your insurer or broker directly if circumstances change, so they can walk you through all the paperwork.
37. In fact, it is possible to adjust your coverage, in general.
There is such a thing as adjustable life insurance that provides flexibility when it comes to changing your coverage, but there’s some risk involved with those policies (see here.) Plus, most insurers let you decrease coverage at least once during the life of the policy.
38. The entire life insurance application process takes about three to four weeks.
You’ll hit snags if your physician delays turning over medical records.
39. A policy goes into effect once you pay your first premium.
After the underwriter approves your application, you have to sign it, make the payment and — boom! — you’re covered. OK, well, maybe not “boom!”
40. Policies lapse if you don’t pay your premiums.
Thank you, Captain Obvious, we know. But we bring this up because … well, coverage reinstatement is a pain in the butt. You’ll go through a lot of the steps you did the first-time you applied — and that potentially includes the medical exam.
41. You usually get a grace period.
You often get 30 to 31 days to make up a missed payment.
42. Premiums aren’t tax-deductible.
I mean, there are a lot of good things about life insurance, but tax benefits on premiums isn’t one of them.
43. The death benefit won’t get taxed, though, when paid out to your beneficiary.
It’s considered reimbursement, not income.
44. Some permanent life insurance has a few other tax benefits.
Permanent life insurance policies have a savings component — called its “cash value” — that you get paid (some) interest on. An increase to a policy’s cash value isn’t considered taxable income.
45. You can cancel a policy.
But the process can be tricky, particularly when it comes to canceling whole life insurance. And there are drawbacks — aside from, you know, not having life insurance — associated with canceling coverage. For instance …
46. Lapses and cancellations can re-up your contestability period.
In the case of cancellation, that’s because you’ll have to wait two years on any policy you switch to.
47. You also might have to pay a cancellation fee.
Having said that, there are times cancellation is in order. Like maybe you hit the lotto and you just don’t need life insurance anymore. Or you have a pricey whole life insurance policy you can’t afford.
48. For most people, life insurance riders aren’t worth the money.
Riders are policy add-ons you can opt for. They’ll tack on some sort of coverage … for an extra cost. Most people don’t need a decreasing premium, child life insurance or accidental death and dismemberment coverage, which pays extra if you die in especially gruesome fashion. (Our life insurance shopping guide breaks down why.)
49. Some insurers include more valuable riders for free.
That includes the accelerated death benefit, which lets you access your death benefit while you’re still alive, but suffering from a terminal illness, so you can pay for medical expenses. Keep this in mind as you comparison shop.
50. There’s help out there.
Shopping for life insurance isn’t easy, but you don’t have to go it alone. PolicyGenius can help you compare quotes and determine how much life insurance you need. Plus, you can fill out the application with us once, and we’ll shop it around to all the insurance companies to get you quotes so you don’t have to apply multiple times to get the best rate. And, if you’re not ready to start shopping yet, we’ve got plenty of more information about life insurance in our learning center.