20/05/2021
Why you should consider buying life insurance in your 20s
By Thandi Skade - September 30, 2015
We bring you four reasons why you should consider taking out life insurance and disability cover in your 20s
You might have just started your first job and you may want to buy a car or move out of your parent’s house.
You may also be overwhelmed with student loan debt that you’re suddenly under pressure to service.
As you face a myriad of expenses in your 20s that you’ve probably never been responsible for before, it’s easy to understand why life or disability insurance may feature at the bottom of your list of priority expenses.
However, Peter Dempsey, deputy CEO for the Association for Savings and Investments SA (Asisa) says your 20-something’s are in fact the best time to buy risk cover because you’re young, in your prime and insurable.
“We need to develop a habit of hoping for the best and preparing for the worst. The best time to put sunscreen on is before you lie in the sun. It’s too late when you’ve already been burnt, and insurance is no different,” says Dempsey.
“Instead of thinking that you don’t need insurance because you’re healthy, consider that getting insurance will be cheaper and easier if you’re healthy.”
Here are four good reasons why you should consider spending your hard-earned cash on life or disability cover.
1. The early bird gets the worm . . . and the best deal
Insurance premiums are influenced by external factors like your age, gender, the condition of your health and your occupation.
If you’re in good health and don’t smoke, your premiums will be considerably cheaper at the age of 25 than when you’re 35.
“Insurance premiums are very affordable when you are young and healthy. You are also able to add extra benefits to your policy such as guaranteed insurability later in life when you may want to increase your cover as well as premium waiver cover whereby your premiums will be paid by the insurer if you are no longer able to earn an income due to disability, dread disease or retrenchment,” Dempsey says.
2. You’re at most risk in your 20s
Statistically speaking, South Africans in their 20s have the highest risk of being killed in an accident or becoming disabled as a result of a car crash than any other age group.
According to Statistics SA data, road deaths peak between the ages of 20 and 34, while around 42% of recorded deaths in the 15-29 year age group were as a result of non-natural causes.
“The first risk cover you should buy in your twenties is disability cover because not only are you at the highest risk of becoming disabled, but you also have the most to lose in terms of earnings. The older you are, the greater the likelihood that you have made provision for retirement,” Dempsey says.
“On the other hand, a young person who becomes disabled and can no longer earn an income would have to rely on the one lump sum disability benefit payment for a lifelong income.”
3. You’ve probably got some form of debt
Whether it’s a student loan, vehicle financing or retail credit accounts the chances are high that you’ve incurred some form of debt in your early 20s.
And if your parents or a relative signed surety on a student loan for instance, you will expose them to your debt burden should you die.
“If you pass away, the weight of these debts could fall on your loved ones. If you’re left disabled, you’ll have the added burden of medical expenses and loss of income while still needing to cover these debts,” Dempsey warns.
“Having adequate financial protection already in place will protect you and your family from financial devastation should you fall victim to a life-changing event such as death or disability.”
4. You may be starting a family
If you’re thinking about settling down and starting a family, risk cover becomes critical to ensuring the financial security of your partner and child in the event of your death or a disability that forces you to stop working.
Online personal finance resource Nerd Wallet advises against naming minor children as beneficiaries because insurance companies are not likely to transfer the payout to them directly. Rather establish a trust or assign a custodian to manage the fund.
