When you’re 20 years old, life insurance is probably near the bottom of your financial considerations. From educational costs to finding your own place or buying your own car, there are plenty of other, more immediate financial and life planning decisions you're making.
What We'll Cover
- Why 20-Year-Olds Need Life Insurance
- What to Look For When Researching Life Insurance at 20
- Finding the Best Cheap Life Insurance Providers at 20 Years Old
- Sproutt Life Insurance
- SelectQuote Life Insurance
- Transamerica Life Insurance
- Pacific Life Insurance
- John Hancock Life Insurance
- Guardian Life Insurance
- The Bottom Line
At the same time, that doesn't mean you shouldn't consider planning. As you're beginning to plan for your first regular income, you'll find plenty of guides helping you start to plan your retirement—but if you don't include life insurance in that planning, you're missing out on a significant piece of the financial puzzle.
Let's dig into why that is the case. We'll start with a few core reasons why 20-year-olds need life insurance, a few of which might be surprising at first. Then, we'll move from the why into the how, helping young adults like you find the best cheap life insurance providers possible for those 20 years old.
Why 20-Year-Olds Need Life Insurance
Let's begin with the most obvious argument: you're not about to live forever. As much as we all envision ourselves to live until old age, that doesn't always happen. If it doesn't, wouldn't you want to make sure that your family members have the money they need to cover any expenses or debts you might have had?
That's not the only reason to shop for life insurance now, though. For starters, it's a significant investment opportunity. Many providers allow you to withdraw cash from your insurance policy as needed. That "cash value" grows the longer you pay into the policy, and (unless you actually take money out) doesn't diminish its value should something happen to you.
Finally, and maybe most importantly, life insurance is cheaper the earlier you sign the policy. If you wait until you're 40 or even 30, the rates will begin to shoot up. But if you get the insurance when you're just 20, you can pay much less (sometimes half) on a monthly or annual basis than you would only a decade later, all while getting the same benefit.
- A 20-year-old male in perfect health would pay an average of $28/month for a 30-year policy valued at $500,000.
- A 40-year-old male in perfect health pays $49 for the exact same policy as the 20-year-old with the same value.
So that's the deal. You and your family get personal assurances should something happen to you. But even if it doesn't, life insurance is a solid investment with an ROI that's better the younger you are when you sign up. Though not many 20-year-olds think of it, finding cheap life insurance providers is a crucial financial decision to make at this age and only becomes more urgent with every year you wait.
What to Look For When Researching Life Insurance at 20
Interested in making the life insurance investment? Great. Now, it's time to get smart. At this age, chances are you've never shopped for life insurance before, so it's crucial to familiarize yourself with some basics before looking at specific providers.
Types of Life Insurance
First, there are two types of life insurances available from most companies:
- Term Life Insurance: As its name suggests, describes a policy that only runs for a specific number of years. If you pass away during that time, your beneficiaries receive the amount on the policy. Once that term is over, the insurance expires. Term life insurance is much cheaper than the alternative, largely because of that expiration.
- Whole Life Insurance: On the other hand, this type of insurance expires only when you stop making payments. It's more expensive as a result, with premiums up to five times as high, but it also builds up cash value over time that you can either take out or borrow as a loan should you ever run into financial difficulties.
Most young adults around age 20 choose term life insurance for the cheaper premiums. If you can afford it, though, whole life insurance may be a valuable alternative to look into.
Next, different providers tend to change their rates based on the health you are in. Some require you to submit a physical, while others trust your word but may come back at you if you weren't being honest. Smokers, people with allergies, and those with a significant history of family health issues may have up to 50% higher monthly premiums than people without health concerns.
Amount of Coverage
Finally, it's important to consider the amount of life insurance that makes sense for you. The general rule of thumb is choosing a policy that's at least five times your annual income. But keep in mind that any life insurance is better than none, so even if you can only afford a low monthly premium, it's worth the investment.
Finding the Best Cheap Life Insurance Providers at 20 Years Old
With these pieces in mind, it's time to compare prices from different providers. A comparison like that helps you understand your options, and which providers can tailor their policy to students and young adults just entering the workforce. Click below to compare the prices, or keep reading for some of the options available to you.
Top 6 Life Insurance Providers for a 20 yr-old Female & Male
Sproutt Life Insurance
Sproutt Life Insurance works especially well because of its focus. Rather than simply asking applicants to fill out a form and get a policy, this online option becomes an active partner of anyone who signs up. There is no medical exam required. That's why it's perfect for young adults just getting started in life, who might need that helping hand as they sign up for life insurance the first time.
To do that, Sprout uses its QL (Quality of Life) Index. Every applicant is measured on five categories: movement, sleep, emotional health, nutrition, and balance. A questionnaire helps you find your score, but here's the kicker: in addition to influencing the premium you pay, that score also influences regular tips Sproutt provides to help you live a healthy life.
|30 Years||$250K||The Average cost of a Life Insurance policy for a 20 yr-old Male in Average Health is $30/month|
|30 Years||$500K||The Average Life Insurance rate for a 20 yr-old Female in Average Health is $40/month|
|30 Years||$750K||The Average Life Insurance monthly premium for a 20 yr-old is $58 Female and $76 Male in Average Health|
SelectQuote Life Insurance
SelectQuote shines because of its customizability. This service doesn't offer its own life insurance but automatically browses policies for both term life and whole life insurance based on a wide range of variables. Especially if you have medical concerns or you're looking for a custom term length, the wide range of selections is perfect for young adults.
The insurance companies SelectQuote brokers your policy from reads like a who's who of the big names in the field: Prudential, Pacific Life, AIG, and more. If you are not yet familiar with the options, the pre-screened credibility means that you can safely sign a policy and know you'll be in good hands.
|Good Health||$500K||The cost of a 30-year term Life Insurance policy for a 20-yr-old is $35/month|
|Good Health||$500K||The cost of a 30-year term Life Insurance policy for a 20-yr-old Female is $27/month|
Transamerica Life Insurance
If you are still a college student, particularly as an undergraduate, Transamerica tends to be a great choice. That's because, rather than having to prove your income, you can simply add your projected income after graduation. If you're not sure, just ask your university's career center for an estimate you can provide.
As a college student, you have to consider who will be able to pay off your student loans should you pass away. Transamerica offers policies up to $500,000, which cover even the most expensive degrees. The only complication here is that you'll need to work directly with an agent to complete your life insurance policy, without the ability to get a free quote online prior to signing up.
Pacific Life Insurance
Too many insurance providers assume that you have to be in perfect health to get a good policy and rate. Pacific Life takes a different approach. Even if you have a history of smoking, a heavier build, or even a condition like anxiety or depression, you can still find affordable rates for a good return.
Depending on your needs, Pacific Life offers the whole range of options: whole life, term, and even some alternatives like variable life insurance and universal life insurance. While those options generally only become relevant as you get older and have more cash flow, you can convert your term policy into a different plan with the same provider down the road.
Like Transamerica, Pacific Life requires you to speak to an agent rather than providing a free quote online. But the company is known for its customer service, so that conversation may be well worth it as you're exploring your options.
John Hancock Life Insurance
We love John Hancock because, much like Sproutt, it's more than just a paper policy. Life insurance clients can take part in a program called Vitality, which encourages healthy lifestyle choices in exchange for cheaper premiums.
Through Vitality, John Hancock clients can get anything from Amazon discounts to daily fitness recipes and tips. It doesn't stop there, though. Enroll in Vitality Pro, and you get a free Fitbit and can even earn an Apple Watch. Especially if you prioritize living well, these discounts can make the policy much more affordable for 20-year-olds looking for cheap life insurance providers.
Guardian Life Insurance
If you're able to afford higher premiums, Guardian Life is a great alternative to the above life insurance options. That's because this provider, in exchange for a higher monthly rate, offers guaranteed cash savings that build up over the life of the policy.
Both the whole life and term life options are available for anyone 18 and over, so you don't have to worry about being too young to qualify. You may have to take a medical exam for the lowest possible rate, but you can add the option to convert your term life insurance to whole life as you move further into your career and life.
|30 Years||$500K||The monthly premium of a Life Insurance policy for a 20 years old Male in Good Health is $54/month|
|30 Years||$500K||The monthly premium of a Life Insurance policy for a 20 years old Female in Good Health is $44/month|
The Bottom Line
Of course, these are just some of the many options you have to find good cheap life insurance providers, even as you're just starting out your adult life. The key is doing your research and finding a provider that matches your lifestyle and needs. That's how you can make sure that even at 20 years old, you can make a financial and personal decision that will actively or passively benefit you for decades to come.