For young adults in the UK, stepping into the world of financial planning, budgeting and insurance for the first time can be daunting. It's a learning experience, probably with a bit of trial and error involved and chances are life insurance isn't the first thing you'll think about.
As is the case at any age, we're all at
different stages in our lives. Some of us may have found our life partner and
got married early. Perhaps it's all been about career progression so far and
saving up for our first homes. Maybe we're still in education. The stage in
your life and the responsibilities you have, rather than your age, should be at
the forefront of your mind when thinking about whether life insurance is right
Research led by Legal & General and the Centre for Economics and Business Research (Cebr) suggests that the 'Bank of Mum and Dad' is set to shell out £6.3 billion worth of loans to their children in order to help them buy their first homes in 2019, with the average figure borrowed just over £24,000. Of course, unlike a personal loan from a bank, your parents are unlikely to demand their money if you were to pass away unexpectedly, but it would still leave them out of pocket.
Of course, if you've secured your own home and you share it with a significant other, you'll probably want to think about covering the outstanding debt of the mortgage. That way, if you were to die before you have paid the mortgage off, your partner would have one less thing to worry about. What income will your dependants need to pay the bills if you die? Would a lump sum to replace a few years' worth of your income to supplement your partner's, especially if you're the main breadwinner, help?
A mortgage is a biggie of course but whatever your life stage, it's possible you've taken out a loan, credit or other agreement with your partner, a parent or a friend. A guarantor loan is a great example of how a potentially expensive bill could land on a friend or loved one's door after you pass away. Life insurance may be worth considering for covering your credit agreements, as loans of this nature are probably more important to cover given that the debt won't disappear if you're not around to pay it.
You could leave a sum behind for a charity, children's hospital or some other cause that's close to your heart. However, you should consider cover to repay your mortgage and loans for the benefit of your dependants as your priority.
Whatever your age, there's a chance you've found your perfect partner and got one or two kids at home. If this is you, life insurance may be a higher priority for you. If something happened to you, how would the bills, rent or mortgage be paid? The thought of your partner having to work to provide for the little one(s) during such a devastating time probably isn't a nice one.
Life insurance may help to provide peace of mind that your partner, and your kids if you have them, receive a lump sum towards your financial burdens should you die. Have you considered how you would cope should your partner pre-decease you? You may need to consider life insurance on your partner too.
Life insurance typically costs more in monthly premiums the older you get. Life insurance companies look at a number of factors when they determine what you'll pay but generally, your age, lifestyle & health and smoker status are three key areas of focus. If you were to buy a life insurance policy for a set number of years while you're younger and in good health, you're likely to get a one-up for the future, save money and be covered from a younger age. Your policy could stay active and cost the same amount per month even as you get older.
When you're younger, life insurance is also likely to cost much less than insuring your latest flagship smartphone, your home and your car combined. The difference is, your belongings can be replaced, but your life can't.
The need for life insurance primarily depends not on your age, but on your stage of life and how prepared you need and want to be for the possibility of your untimely death. You can of course have dependants, a house and debts at any age, young or old.
If you begin to master the art of financial planning at a younger age, consider your debts and income and budget effectively, you're likely to consider life insurance in the same way you think about your car, gadget, holiday or home.
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