There is a misconception that ‘millennials’ are carefree and spending all their money on espresso. In fact, many of the millennial generation - classified as those born between the early 80s and mid-90s, myself included - are hurtling towards 40.
Many are married/co-habiting, have children, mortgages, elderly dependent relatives and salaries that they rely on to support all these responsibilities.
Those in their twenties and thirties, hardest hit by the 2008 financial crisis have a lot of immediate financial concerns and pressures.
But what about preparing for what might be a particularly uncertain future?
Who or what do you need to protect?
Life insurance is not suitable for everyone. Though products vary, the idea of most life insurance policies is that it pays out an amount of money to your nominated loved ones if you die within a period of time.
Do you need life insurance cover?
Think about what would happen if you were to die.
Would it leave anyone close to you in financial difficulty, or ruin any future plans that they have?
If you are single, or in a relationship where you are not financially interdependent, then probably not.
If you have children, however, your death could mean that they might face a disruptive house move because the family home is no longer affordable. Or your partner might struggle to pay bills or debts on just one income.
A life insurance payout could prevent loved ones falling into financial hardship.
Understand the different life insurance products available
There are different types of life insurance. What will suit you and your family depends on what you are most concerned about protecting. Some life insurance types are linked to your mortgage only, so the payout would cover paying off the home loan in full if you were to die before you manage to clear it yourself. This means that your partner or family don’t have to worry about how they will meet repayments without your income.
Other life insurance products are more comprehensive, offering your family a lump sum of money for them to spend as they wish. This could be used for the mortgage, or other debts, to enable your partner to give up work, perhaps, or pay for your children’s future university education.
Some life insurance policies pay out a set sum of money as a regular monthly income rather than one big amount. These tend to be cheaper up front, but may work out as less generous unless you die early in the policy.
When working out what to insure, consider not just the main breadwinner’s earning capacity, but also the value of unpaid work around the house, or caring for children or relatives.
If the primary carer was to die there will be a financial impact, too, even if they don't have a paid job. The breadwinner will perhaps have to take on these extra roles and less well-paid work, or be forced to find money for childcare.
Typically, it’s probably best to get life insurance that covers you for a period of time, for example, until your children have left full-time education. Or, if you are insuring for a partner, until they have reached retirement age.
The advantage of being young
There is an advantage to millennials planning early. The cost of life insurance is priced based on the level of risk. That is, how likely it is that you will die sooner rather than later. Other factors include your health, occupation, whether you smoke, and of course, your age.
The younger and healthier you are, the more likely that the policy will be cheaper.
Some millennials may have a life insurance policy attached to their job. But before you automatically rely on that, consider what would happen if you switched jobs, and whether you had to find a new policy when you enter a new role.
Life insurance may be more expensive by that point because you are older, or potentially suffering from health issues.
You may want to consider income protection too, but do seek financial advice first.
Life insurance is not the only product you might want to consider.
If you fell ill, or became disabled and were unable to work, how would your finances, and your family’s, be impacted?
Income protection, for example, can be particularly helpful for those who are self-employed, insuring your ability to earn money.
Be wary of cheap life insurance products that can end up being a false economy. Some will not insure you for being unable to do your job, but pay out only if you cannot work full stop, which might mean you don’t receive a pay-out when it is most needed.
If in doubt, seek financial advice to discuss your options and find a policy most suitable for your family’s circumstances.