5 Reasons Millennials Need Life Insurance and How Employers Should Approach the Subject
October 23, 2017
Young, healthy employees still need protection
The 2017 Insurance Barometer Study by Life Happens revealed that only 59% of people have life insurance. A separate survey by Princeton found stark differences in insurance coverage between different generations:
|Generation||% with Life Insurance|
When those who didn’t purchase life insurance were asked why, cost was the most commonly reported reason. Youth and vitality added another factor; 71% Millennials cited being young and healthy as a reason to deprioritize life insurance. Ironically, another study by Vertafore found that 77% of Millennials understand that not having life insurance is risky, yet many still choose to spend on more appealing items.
A solid financial plan must include life insurance
Investors often cite the value of ‘protecting the downside’—or having a strategy to reduce risk if an investment goes the wrong way. Life insurance is essentially downside protection against your overall financial plan. It helps care for your loved ones if the worst unexpected risk—and untimely death—becomes reality. That’s why financial planners always include life insurance in the portfolio of assets that make up a client’s financial strategy.
5 reasons Millennials should acquire life insurance now
- It’s less expensive when you’re young. According to Barron’s, a healthy 25-year-old can purchase $1M worth of term life insurance at about $50-$60 in monthly premium payments—or around $2 per day. An older, 35-year-old Millennial could get the same coverage for about $70 per month.
- You have kids or a spouse to protect. Many Millennials are now entering the phase of life where they are building their families. Having a spouse and/or young children to consider changes the risk equation. Although dying young is an unlikely event, it would cause tremendous financial hardship on a young, two-income family. The average funeral alone costs $6,000 to $10,000. And financial goals such as college expenses for children would be much harder for a single, widowed parent to achieve alone.
- You have debt. Many Millennials have debts that would need to be paid in the event of their unexpected demise. The National Center for Education Statistics (NCES) performed a long-term educational study of Millennials and found that 84% of them attended post-secondary education. Of those, 60% took out student loans, averaging $30,000. Millennials with debt should always carry more than enough life insurance to clear their debts and not leave it for loved ones.
- Some insurance policies have a savings component. Unlike term life insurance, the value of a whole life insurance policy can grow tax free and accumulate greater cash value over time. The premiums are more expensive than term life insurance, but the cash value can be borrowed against in a time of financial hardship and this type of policy covers you until your death as long as you pay your premiums. Millennials might want to consider this while they are young and healthy—a medical condition in later years could make it harder to qualify for more insurance.
- Employer plans may not provide enough coverage. While many employers provide life insurance policies worth one to two times annual salary, that may not be enough coverage for many Millennials. Financial planners often advise having seven to ten times your income in life insurance, and your needs could be higher if you are carrying a lot of debt that needs to be paid off, such as student loans and a mortgage.
Employers should talk to Millennials about life insurance
Employees, and especially Millennial employees, may not understand the necessity of having life insurance as part of a comprehensive package of financial benefits. Through benefits education, employers can help Millennials understand their insurance needs, as well as the ways they can take advantage of voluntary benefits to boost the amount of life insurance above the employer-provided amounts.
Communication about benefits should take place year-round. In the lead up to open enrollment season, employers should practice the 3+3 rule to ensure Millennials receive the information they need about life insurance. Present the information using at least three different mediums (email, web tools, printed material) and communicate a minimum of three weeks before open enrollment, so employees have time to process the information.
Asure Software’s Human Capital Management solutions can help employers administer benefit plans more efficiently and communicate effectively with employees. They also provide employees with self-service access to view and enroll in the right benefits plans for their individual situations.