Think you’re too young for life insurance? Buying early can help save on premiums

Buying life insurance in your 20s can feel like an added cost to an already long list of expenses. But experts say it can safeguard loved ones if life doesn’t go as planned.
There can be a “very high temporary insurance need” for younger Canadians, said Andrea Thompson, a certified financial planner at Modern Cents, in an interview. That’s because mortgage debt and lost income earning potential over their lifetime creates a need to protect their family’s financial interests.
While life insurance often doesn’t take priority for a carefree 20-something-year-old, it can help protect families and co-signers from incurring that debt suddenly if the young person dies unexpectedly.
“Life insurance is mostly for legacy, taxes and loved ones,” said Jeffrey Talor, director of sales at Canwise Life Insurance Services.
“You want to make sure that your family is not exposed in the event of your passing.”
There are a lot of benefits to purchasing life insurance when young, Talor said. Age is an important factor in locking in a lower premium for the coming decades.
Down the road, Talor said, if their health deteriorates and a person already owns life insurance, the premium will not change until the term ends.
The policy is calculated by age, among other factors, Talor said. Fewer medical requirements and lower mortality rates for those in their 20s make it easier and cheaper to buy life insurance.
“Between 20 to 30, we’re noticing it’s the best rate band and between 30 to 40, there is a bit of an increase, then 40 to 50, it’s becoming somewhat pricey,” Talor said.
He says a lack of education on the benefits of life insurance also dissuades young Canadians.
“We think it’s so expensive to buy insurance,” he said. “It’s not that expensive to buy term insurance, it’s about a dollar or $2 a day.”
Term life insurance covers the policyholder for a set period, such as 10 or 20 years, and the premiums do not change throughout the length of the term. Permanent life insurance can come with more expensive premiums because it covers you for your entire life. While the premiums can be higher, they are also fixed.
Some permanent life insurance policies also have a cash value feature, where a portion of the premiums goes toward building a cash value over time which the consumer can use or borrow from.
The individual could use the cash value portion as collateral for loans, Talor said. Other benefits could include buying built-in creditor protection in case a person files for bankruptcy in the future.
But there’s no magical age to buy life insurance at, said Thompson.
“By 22, you might not have a mortgage yet and might not have dependants,” she said. “There’s not a specific age that I would say everyone should rush out and go get insurance.”
As you move through life, changes such as marriage, a mortgage, or having children, change the amount of insurance coverage needed.
Thomson said she recommends an insurance needs analysis to all her clients as part of her holistic financial planning, which helps determine risks based on age and life stage.
Most people have some base coverage through their employment with group insurance but Thompson said it may not be enough.
Talor said people can buy insurance in stages as their life situation evolves.
“In your 20s, you need X, then come 40s, you start a business so you incur more debt,” he said. “You can always go back to market and purchase small. The advantage of having insurance is you can stack life insurance policies in Canada,” he said.
Talor suggested people look at their budget and determine the amount they’re comfortable spending on a life insurance policy.
“The most important thing is to understand life insurance is not a difficult or complex thing to acquire,” he said. “Dealing with the right broker that can simplify the process and understanding the terms and conditions up front makes it way easier.”
This report by The Canadian Press was first published Nov. 19, 2024.
Note to readers: This is a corrected story. A previous version incorrectly reported that Andrea Thompson said young people have a need for insurance because of debt such as student loans and car loans.