Life insurance for young adults

The honest answer for most people

If nobody depends on your income and nobody else is on the hook for your debt, you do not currently have a problem that life insurance solves.

Anyone telling a healthy 24-year-old with no children and no shared borrowing that they urgently need coverage is selling rather than advising. It is worth saying plainly, because a lot of what is written for this age group starts from the opposite assumption.

There are still two decent reasons to buy, and they are different from the usual pitch.

Student debt does not work the way people fear

This is the single most common worry in this age group, and the answer is usually reassuring.

Canada Student Loans, and the provincial loans that accompany them, are not passed to your family if you die. The obligation ends with the borrower. Nobody comes to your parents for the balance.

The exception matters though. Private debt with a co-signer is different. A student line of credit at a bank that a parent co-signed, a car loan with someone else on it, a private loan: in those cases the co-signer remains fully responsible for the balance.

So the question is not “how much debt do I have” but “did anyone sign alongside me”. If a parent co-signed a substantial line of credit, that is a real obligation that would land on them, and it is insurable.

The two arguments that hold up

Price is locked at the age you buy. A 20-year term bought at 25 is priced at 25 for the whole two decades. The same policy at 35 costs more, permanently. If you know you will want coverage for a mortgage and children within a few years, buying slightly ahead of that is inexpensive.

Insurability cannot be scheduled. This is the stronger point. Coverage is priced on your health at the point of application. Once issued, a later diagnosis does not change the price or let the insurer cancel it, provided you disclosed honestly and keep paying.

A diagnosis before you apply changes everything about the application. Nobody plans that. Someone who intended to sort out insurance next year, and had a routine test in the meantime, is in a different position from the person they were.

A modest policy bought in good health at 26 is coverage that exists regardless of what shows up at 41.

The conversion right makes it more useful

Most term policies carry a right to convert to permanent coverage later, without new medical evidence, up to a deadline in the contract.

That turns a small policy bought young into something more than its face amount. It is a foothold: if your health changes at 38 and you need permanent coverage for reasons that did not exist at 26, the conversion right is what lets you get it. See converting term to permanent.

If you buy in your twenties, buy a convertible policy and note the conversion deadline. That is most of the value.

What not to do

Do not buy a large permanent policy as an investment. This is the most common bad outcome in this age group. RRSP and TFSA room is simpler, cheaper and more flexible, and almost nobody in their twenties has used theirs. See is permanent life insurance a good investment.

Do not buy more than you need. Coverage sized to obligations you do not have is money spent on nothing.

Do not assume work coverage is enough later. It ends with the job, and it is usually smaller than people think. See work coverage versus your own policy.

What tends to make sense

If you have co-signed debt or anyone relying on you, insure that specifically.

If you do not, but you expect a mortgage or children within a few years, a modest convertible term policy bought now is inexpensive and locks in both price and insurability. A 20 or 30 year term at this age costs very little.

If you have neither and expect neither, it is entirely reasonable to leave this for a few years, and to revisit it when something changes. When to buy life insurance lists the events worth revisiting on.