When you’re young or don’t have many family responsibilities, you’re likely to prioritise paying off student loans, buying a car, moving out of home and starting a career. At this stage, life cover is seldom top of mind. However, Product Actuary Petrie Marx points out why it’s always best to buy life insurance at a young age – the biggest advantage being lower premiums.
With people tending to buy their first home, get married and start a family at a much later stage than in previous years, they often postpone buying insurance – to their future detriment, Petrie says.
‘Young people are reaching life stages that usually trigger the need for insurance much later. There’s also a misperception that risk cover is costly and irrelevant, but in reality it’s often cheaper than what people think. Risk cover also has more uses for a young person who doesn’t have enough savings and assets to live off if they were to experience an adverse event.’
The main reason for taking out life insurance at any age is to maintain your current lifestyle should you become disabled or severely ill to the point that you can’t work, he explains.
‘When you’re young and single there are many insurance benefits, such as income protection and disability cover, that can help you maintain your current lifestyle. If you’re married, insurance can enable your family to keep the roof over their heads if your home is still owned by the bank.’
Why take out life cover when you’re young?
- You’re likely to pay a lower premium – In general, young adults are healthier, which qualifies them for lower monthly premiums and cover with no exclusions. By purchasing insurance at an early stage in life, your insurance will stay intact according to your initial policy wording even if your health deteriorates as you get older
- Loved ones won’t be liable for your debt – Many people start their careers with student loan debt, while others also have other forms of debt. A report released by the Credit Ombud last year showed most young people open various accounts from as young as age 18 years. To protect your family from being liable for your debt in the event of your death, life cover is imperative
- You’re protected if an accident or illness prevents you from earning an income – Things can go wrong for young people too, with roughly half of all Sanlam’s claims involving people under age 30 for non-natural (or accidental) causes, of which motor vehicle accidents account for a sizable portion. A bad accident can compromise your ability to earn an income, which is particularly detrimental for someone with ±40 years of earning potential ahead. There’s also been a steady rise in dread disease claims among young adults in the past few years. In 2017, 6% of severe illness claims received by Sanlam were for people younger than 35.