How Life Insurance Works: What Millennials Need to Know

How Does Life Insurance Work?

If you're under 35, you might wonder what life insurance is, and whether you need it. If you want to know how does life insurance work, keep reading.

As millennial take on the great responsibilities of life, their good financial habits are surprising everyone. But they're still asking one question: "How does life insurance work?"

Despite being the most educated generation in history, millennial have had a rough start. Many of them entered the workforce during one of the worst economic periods in history. One-third of millennial who become insolvent carry student loan debt.

Despite these difficulties, millennial are saving money in record numbers. Most young people can't afford a house, but manage to a greater share of their income than other generations.

For Millennial's Life Insurance Isn't a Priority

1/3 of millennial have thought about obtaining life insurance to protect their loved ones, but 55% don't have a policy.

Many find that existing insurance options are too complicated and detract from personalized online services young people have come to expect.

Budgeting, student loans, and other forms of debt are also contributors. Immediate financial concerns are pushing life insurance to the bottom of the list.

But most millennials don't have an RRSP, home equity, or some other financial safety net for their dependents. Life insurance should be the obvious choice for the financial security.

Yet many more millennials are asking the same question: "How does life insurance work?" Millennials who don't understand the costs and benefits associated with life insurance may not realize how easy and affordable it can be. What's more, they may not realize how important it is to the well being of their loved ones.

How Does Life Insurance Work?

Millennial face unique financial challenges. Despite this, the number of millennial who are saving money is growing.

Once millennial have an answer to the question, "how does life insurance work?" their recent good habits may carry over into this new financial responsibility.

Let's explore some of the common questions millennial ask about how life insurance works, and how they can find a life insurance plan that works for them.

Life Insurance Basics

When you're trying to make rent, what happens after your death can seem like a distant concern. But life insurance isn't a challenge for the distant future. Life insurance is a way you can protect your loved ones starting today.

The most important thing to know about life insurance is that it protects those who depend on you in a moment of tremendous need--the event of your death.

And it does even more: life insurance provides security and peace of mind for your family, every single day.

Why You Need Life Insurance

In the event of your death, there will be immediate costs to your family. They will need a plan for any funeral costs and generally dealing with your remains.

Unfortunately, your debt and other financial responsibilities won't vanish when you're gone. Co-signers on private student loans inherit that debt immediately, for example.

At least in part, your financial burdens in life become your family's burden after your death. Let's take a look at the monthly cost of preventing that from happening.

Choosing Your Coverage

Fortunately, the average monthly cost of life insurance is relatively low. 

Term insurance is typically the cheapest type of policy, providing death benefits for a set period of time. Monthly premiums for term insurance can cost less than your gas bill.

Permanent insurance is a more costly, complex option. Also called whole or universal insurance, these plans will stay in effect for your entire life. Term insurance is the most popular plan, especially for young people who have a lot of life ahead of them.

You need to do some investigating to understand the ins and outs of insurance before you start. There are plenty of insurance products that are affordable enough to fit millennial's lifestyle and protect their families.

Life Insurance Costs

Cost is a universal concern to this financially strapped generation. Life insurance advertisers are notorious for selling based on affordability rather than coverage. The marketing ploy is to sell ineffective plans to otherwise sensible young people.

Don't pick insurance companies' low-hanging fruit. Visit an online service provider to easily get a quote and build your search from there.

Life Insurance "Alternatives"

Many Canadians are under insured or even uninsured when it comes to healthcare costs. Many turn to social fundraising platforms like GoFundMe and find some degree of success. But social fundraising platforms are not a substitute for good insurance. Here's why:

• • You cannot depend on crowdfunding in immediate times of need. Unlike insurance, funders on these platforms have no contractual obligation to help.
• • You may not receive the money you need in time. These campaigns don't hold up as assets against the sad event of a home foreclosure after your death.
• • You place these fundraising responsibilities upon your loved ones. GoFundMe campaigns are a public display that require substantial effort. Your spouse or your children may not be up to the challenge.

Remember, the important benefit of life insurance is security. Social fundraising might be a great secondary option if your coverage isn't enough. Now we'll discuss how you can prevent that from happening.

How do I choose a life insurance policy?

After some investigating, you should have a good understanding of life insurance and its policies. Now that you're ready to select a policy, consider the following factors and how they should contribute to how much coverage you need:

• • How much family income you provide
• • How many dependents you have
• • What financial obligations your family will be responsible for after your death
• • The length of time in which you will have coverage
• • How much coverage you can afford

It's difficult to think about your family facing financial hardships as a result of your debt.

Your death may also seem like something ambiguous in the distant future.

How does life insurance work? It's a long-term financial plan, but it isn't just about monetary value. It provides peace of mind to you and your family.

Get Started Right Now

Time to take charge. You can easily find a smart and affordable life insurance plan right now. Get a free quote and select from dozens of plans that fit your life, family, and lifestyle.