Life insurance for the young: why wait?

For young people who are just starting out in the world of work, planning for death, disability or a serious illness is not exactly top of mind.

Hollard Life  says this is evident in the significantly lower number of their clients who are in the 20-30 year age group when compared with people between 30 and 40.  “The average age of clients taking out life, disability and critical illness cover for the first time is getting older.  Today, we’re seeing young people focusing on their careers and delaying marriage and families until well into their 30s. With the postponement of these major lifestyle decisions, insurance purchases are being delayed too,” explains Ryan Chegwidden, Technical Head at Hollard Life.

Expect the best, plan for the worst

24-year old Quinton Roux found out just how important life insurance is after agreeing to meet with his father’s financial advisor.

“I lived with my folks and had just started working at an auditing firm after varsity.  My parents always emphasised the importance of starting to plan for retirement the day I started working but I had never considered what the financial impact of a serious illness, disability or even dying would be.  It was on my dad’s insistence that I met with his financial advisor, and up until that stage, I was convinced that I was too young to possibly need life insurance.  The financial needs analysis and a honest discussion with my financial advisor  made me realise how badly my family would have been affected if anything happened to me,” explains Quinton.

“I had study loans of over R200k. If I died or couldn’t pay back my loans because of a serious illness or disability, my parents would be lumbered with my debt as they had signed surety for me with the bank. I also travel to work in the heart of Sandton on a motorbike to avoid the traffic and save on petrol costs.  When my advisor asked me how I would maintain my standard of living for the rest of my life if I became disabled in an accident and had no income, the lights really came on for me.  There really is no such thing as having no dependents – I had an obligation to myself to see to it that I was financially secure even if the worst happened.  I realised that without life insurance, my parents’ comfortable retirement, something they were aiming for in the next five to 10 years, could be destroyed by my lack of planning,” he adds.

You’re never too young for life insurance

While you may be young and on top of the career game, the need to protect yourself from the financial implications of a serious illness, disability or even death are no less important than they are for older people with dependents. Most young people don’t realise that they already have an important responsibility to ensure that they are able to sustain themselves financially in the face of a life changing event.

When you consider the implications of a twenty-something-year-old permanently disabled in an accident having to sustain his or her standard of living for the next 40 years without a salary, the need for cover becomes crystal clear. Life can take a challenging turn at any age, so make sure you’re prepared to live your life to the absolute fullest, no matter what the future holds in store.

Hollard Life provides some valuable considerations for young people embarking on their first financial planning journey:

• Speak to a professional: Avoid the inherent pitfalls in a DIY approach and get the experience, advice and product knowledge of a professional financial advisor to ensure your money is well spent on the best cover for your needs.
• Your employee benefits may not be enough: Many companies offer cover as part of employee benefits packages but group-scheme policies usually don’t provide anywhere close to the benefits and cover that an individually-rated policy will. Ask your advisor to assess whether these covers are the best value for money and that the benefits are right for your unique needs.
• You’re never too young for disability cover: The real challenge in surviving a disability is being able to provide a future income for yourself. You might not have any major outstanding debt in the form of a bond, but you’ll always have day-to-day living expenses. Your first priority should therefore be disability cover.
• Critical illness is not just for the old: Remember, if you develop a serious illness like cancer or heart disease and don’t have critical illness cover in place, you may not be able to get cover in future. Not only is treatment for a serious illness expensive (and not always fully covered by medical aid) but there are other costs that people don’t often expect. That’s why it’s so essential to have critical illness cover and to get it when you’re young because when it’s cheapest and easiest to acquire.
• Prioritise your financial plan: Many people are struggling with daily living costs such as rent, groceries and utility bills that take preference over purchasing life insurance. Ask your financial advisor to help you prioritise what you absolutely have to have and shop around for the best price and benefits for your needs.

“No one particularly enjoys thinking about their own death or the possibility of suffering poor health, but the reality is that we tend to have less savings and more expenses when we are young and building our asset base. The reality is that you need cover when you are young.  This is the most productive time of your life when you are most reliant on your income to meet financial obligations now and in the future.  Buy early in your career: not only is this the time when you need it most, but it’s also the time when insurance premiums are cheaper,” concludes Ryan Chegwidden of Hollard Life.