Why should a twenty year old buy life insurance?

During my career, I have been asked a simple question repeatedly: why should a twenty year old buy life insurance?  In many ways, this is the easiest and hardest financial planning question to answer. For the answer to the question lies in statistics, expectations, hopes and the way in which we wish to live our lives.

Statistically, it is quite clear that most people in the Western World will not die tomorrow. The Institute of Medicine
(US) Committee on Palliative and End-of-Life Care for Children and Their Families noted that while those between
the age of 0 and 19 made up 29 percent of the population in 1999, they only made up 2% of all deaths. 

In fact, if you look at statistics from Canada, the US and the UK, you see a remarkably similar trend. From birth
to the pre-teen years, the likelihood of death drops off dramatically. Or put differently, based on the StatsCanada
data from 2014-2018, from birth to age 1, 4.5 Canadian babies out of 1,000 will die. However, by age 8, 9 or 10,
only 1 child in 10,000 (i.e. 0.1 out of 1,000) will pass on. Given that the average death rate in Canada is just
over 7 people per thousand, one can see that a child’s death is rare.

This is also true for teenagers, those in their 20’s, 30’s and 40’s. During the same time period, if you were
between the ages of 15 and 19, the death rate was only .32 per 1,000 Canadians; and the high point was reached
by those in their late 40’s at 1.84 per thousand. In fact, only at the age of 55 does your likelihood of death begin
to resemble that of a newborn. So why should a twenty year old buy life insurance? 

Here are my three reasons. My first reason is the wisdom of others. It is hard to imagine your future life today.
As an example, you might get married. If you get married, you might get a divorce; or you might have or adopt a
child. You might raise the child of a relative or your grandchild because of circumstances beyond your wildest
imagination. Or, you might decide that you want to leave a legacy to a university, a religious institution, a
hospital, a charity or to your family. Either way, it is hard to imagine what might happen ten, twenty or thirty
years into the future. 

However, without fail, since I have been licensed as an insurance professional, just about every person I know
who tries to buy a policy at the age of 40, 50, 60, 65 or 70 always says one thing: I wish I had bought this policy
when I was in my twenties. Most people are presented with the idea of buying a whole life, universal life or term
life insurance policy when they are in their twenties. Sometimes, it is because a close relative or friend has gotten
into the business. Sometimes, it is because their parents try to give them advice. Whatever the way they came to
the idea, that person says one powerful word: “ no”. The reasons always vary and they often include timing, money,
priority and desire.

Time goes by and then something happens. They get married or they get divorced; they become sick; they retire;
they have a child or they adopt a child; or, worst of all, someone dies. For some reason, a critical life event happens
and that insurance policy now becomes important. However, that same potential client is in for a shock. The life
insurance policy has now become ridiculously expensive because they have become older, or their health has
deteriorated, or government regulations have changed or the market conditions have caused access to the product to
be more rigourous. It is at that time, I hear a variation of the same thing: only if I had bought that policy twenty,
thirty or forty years ago. So my first reason is simple: learn from everyone else. You cannot see into or predict the
future; so buy a policy when you can and that means buying it when you are in your twenties. 

We all know the second reason. Simply put, your health will likely get worse. As we get older, our bodies begin to
break down. Sometimes, it is because of our genetics. Those problems cannot be helped. 

Other times, it is because of the choices we make. While some - like smoking - are reversible, in part or in whole, I
can honestly say that it is rare for people to make those choices. I have rarely seen a client that has accomplished
this on their own anticipated timeline. I have rarely seen a client lose 25 lbs and maintain it for a long period of
time. The problem, though, is that it is those choices which can affect your premiums. Cigarette smokers are
usually charged twice or three times as much money for an insurance policy. Drivers who speed, heavy drinkers or
those with extra weight can also see their premiums raised. Given that your health will only get worse - because of
genetics or your choices - buying a policy in your twenties, when you are likely your healthiest, is always the best
choice. 

The last reason is your family history. What many people don’t realize is that their parents are getting older too. It is
not a pleasant thing for most of us to think about, but our parents are just as mortal as us. So as we age, so do our
parents. If our parents had us  in their 20s, 30s, or 40s; twenty years on, they are in their 40s, 50s, or 60s. As our
parents age, they will break down. The only problem is that insurance companies ask about our family’s health
history. The further our parent’s get into their golden years, the more likely that something will come up; and, even
worse, clients will find out. If a client knows, they are obligated to tell an insurance company. In my experience, the
easiest way to elevate the problem is simple: buy a policy in your twenties.

Now, these are not the only reasons why one should buy a policy in their twenties. If you plan to own a small
business, it will likely be incorporated. From “key person insurance” to funding a buy-sell agreement, there are
many good reasons why you should want to own a life insurance plan. If you want to get married or have a child or
want to own a home and will have a mortgage, there are different reasons why you want to have a life insurance
portfolio. However, as I hope I have pointed out, one cannot predict the future. If one wants to do any of the things
which might require the future purchase of a life insurance policy, one might want to do it now, when you can
qualify for it.