Life insurance for young adults

It might not be front of mind when you’re in your 20s but, if you have children or a mortgage, taking out life insurance is something you should seriously consider.

Eve Powell
Eve Powell
Updated 6 October 2022  | 4 mins read

Key points

  • Life insurance can make sure your loved ones will be looked after financially if you die unexpectedly
  • The younger you are, the less you’ll pay and any changes in your health over time won’t increase your premium 
  • Different types of policies are designed for different needs, so it’s worth taking time to do your research 
  • Getting life insurance becomes more expensive as you get older, but it’s something you should consider regardless of your age

When should young people get life insurance?

Although it’s possible to take out a life insurance policy once you reach the age of 18, there’s no set rule for when you should have cover in place.

Life insurance helps to protect your loved ones financially if you die during the policy term, so when you take it out will depend on your circumstances.

Generally, it’s recommended that you get life insurance when you take on a big financial commitment, like a mortgage, or once you start a family or get married.

And the younger you are when you take out cover, the more affordable it will be.

Is life insurance worth it in your 20s?

When you’re considering life insurance, you’ll need to think about who’d be affected financially if you were to pass away.

If you have financial commitments in your 20s, life insurance can provide a cash buffer to help your loved ones with any ongoing costs after you’ve gone.

Insurers take into account your age and health when they calculate your premiums.

So when you’re in your 20s, the costs will be lower than if you wait until you’re older. Plus, taking out cover as a young adult can mean you’ll be insured for longer.

Am I too old for life insurance?

Age can play a big part in deciding whether to get life insurance, but it’s really never too late to think about providing your loved ones with some financial protection.

The maximum age limit for life insurance varies between insurers, with some covering you up to 70 years of age and others prepared to insure you until you’re 90.

As you get older, your options for buying life insurance can get more limited, but there are specialist policies for over 50s that can help.

So, if you have dependants who’d struggle to make ends meet without you, life insurance is worth considering whatever your age.

How does the cost of premiums change with age?

By taking out life insurance when you’re younger, you’ll benefit from lower premiums and any changes in your health over time won’t cause them to increase.

And while you might pay premiums for longer by taking out a policy earlier, you’ll usually pay less overall and can be insured for a greater length of time.

The chances of you becoming ill or dying increase with age. This means the older you are when you take out cover, the higher your premiums will be for the duration of the policy.

What affects life insurance premiums?

It’s not just your age that will affect how much you pay for life insurance. Other factors insurers look at when setting your premium include:

  • Your occupation - Some occupations are more dangerous than others, so insurers may view your job as putting you at higher risk of making a claim
  • Your health - If you have any significant health issues that appear on your medical history this will affect how much you pay
  • Your habits and lifestyle - Insurers will look at things that might affect the state of your health, like whether you’re a smoker, how much alcohol you drink and your BMI
  • Your hobbies - Insurers sometimes want to see if you have any dangerous hobbies, like rock climbing or skydiving, that could put you more at risk
  • The policy term - How long you choose your cover to last will affect how much you have to pay
  • The payout amount - The higher the lump sum you’d like your policy to pay out, the more expensive your premiums are likely to be

What are the best life insurance policies for young people?

There are policies to suit different needs and situations. If you’re a young adult, the options you might want to consider include:

Decreasing term insurance

This type of policy is typically used to protect repayment mortgages and is usually the cheapest option. The cover will last for your mortgage term and the payout amount will decrease over time to match your reducing mortgage balance

Increasing term insurance

The amount your loved ones will receive if you die during the policy term increases annually by a set amount to help protect the payout from inflation

Level term insurance

With a level term policy, the amount of cover is fixed for the policy term. You can choose the term length and payout amount, so it can cover more than just the mortgage. As it provides a fixed payout, it’s usually more expensive than decreasing term cover

Whole of life cover

It’s possible to buy life insurance that will last your entire lifetime - this is called whole of life cover. It provides a guaranteed payout whenever you die, but this level of financial security means it’s usually far more expensive than a term cover policy

What are the alternatives?

If you want to give your loved ones some financial protection if things don’t go to plan, there are some other options you could also consider:

Critical illness - This type of cover will provide a payout if you’re diagnosed with a serious medical condition that’s listed on the policy. It can either be added to your life insurance or taken out as separate cover

Income protection - If you want to protect your income, this type of policy will pay a percentage of your usual salary in tax-free payments if you can’t work because of illness or injury. This will be for a set amount of time or until you’re back in employment again (whichever comes first). You might not be eligible for this cover if you have a dangerous job

Terminal illness cover - This will pay out if you get diagnosed with a terminal illness, which is usually when you’re given a life expectancy of less than 12 months. Life insurance often includes this cover as standard, but you can take it out separately

Death in service - Some businesses offer this insurance as an employee benefit. It will pay out a lump sum, which is a multiple of your salary, to a named beneficiary if you’re working for the company and die while you’re on the payroll (you don’t need to die while in work)

What other things should you consider when buying life insurance?

To help you get the right type and level of cover, you should also make sure you think about the following:

  1. Joint or single cover

    If there’s two of you, joint cover will normally be cheaper, but it’ll only pay out once, so it’s worth considering whether individual policies might be better

  2. The amount of cover

    You’ll need to balance what amount will be enough for your family’s financial needs with the premium you can afford to pay

  3. The length of cover

    You’ll need to think about how long you’ll need cover for. It might be until the end of your mortgage term or to last until your children reach adulthood

  4. Your earnings

    Even if you’re a stay-at-home parent, you should consider taking out cover as your loss might mean there’s a need to pay for childcare

  5. Your budget

    It’s worth checking what monthly premium you could afford and comparing quotes to get the best and most affordable cover