The younger generation seems to have the knack for breaking through the status quo, and life insurance may be on the next list. The role of workplace group life insurance in long-term financial planning can change as Gen Z and Millennial workers challenge traditional career concepts and drive increased freelance.
Jessica Lepore, founder of Surevested, a New York-based life insurance agency, understands that freelancers need to be 100% responsible for their finances. “Not everything is packaged like when working in a company.”
Less dependent on group life policy
Grant Dan, vice president of financial services at Lake Nan, an insurance broker in St. Louis, says many people in their 40s and 50s rely on life insurance provided through their employers. But the younger generation prefers to look for coverage outside the workplace, he says. Last year, life insurance applications grew more than twice as fast as Americans under the age of 44 compared to Americans aged 45-59, according to MIB Group, an information sharing service for insurance companies. ..
“They know that employers will change significantly over the next three decades, so they go to more external markets rather than just trusting what they have through their employers,” says Dan. ..
According to the latest data from the Bureau of Labor Statistics, young workers usually do not stay at work as long as they are older workers. The median tenure in January 2020 was 2.8 years for workers aged 25-34, compared to 9.9 years for workers aged 55-64.
Workers may not always be able to translate group life into individual policies to avoid losing coverage when they quit their jobs. “You don’t have to worry because all you have to do is get out of your employer to the millennials who are planning to change jobs,” says Dan. This is probably even more necessary for long-term freelancers who do not have an employer to provide compensation.
In addition, basic group life insurance may be provided free of charge to employees, but in many cases it is best at one to two times the worker’s annual salary. According to Dan, this is usually not enough to provide an economical safety net.
Differences in freelancer life insurance plans
Easy way to estimate How much life insurance do you need Multiply your income by the number of years your beneficiaries need financial support. This calculation can be difficult for freelancers with unpredictable income, but it can follow the lead of workers in fee-based jobs like real estate, where monthly income may be inconsistent, Dan said. Says.
He suggests seeing what you earn on average and what people at your skill level are making over time. Estimating your annual salary will give you an idea of how much life insurance you need to cover if you die.
If you’re not sure about your future needs, it’s a good idea to get insurance that can be adjusted over time, such as term life insurance, which can be converted to permanent insurance later.
“The best thing we’ve ever done is to implement at least one policy, because we can qualify later in life if we decide we need more compensation.”
Changes in the way Americans buy life insurance
Traditionally, getting life insurance can take weeks and often requires a medical examination. “With all the technologies today, the younger generation can’t bother because it takes 45 days to enforce the policy,” says Dan.
Some insurers have already addressed this issue by using big data algorithms to process their applications online in minutes. Therefore, if you are looking for quick coverage, these products may be your best bet. However, whether you shop online or not, the type of life insurance you buy must be in line with your overall coverage goals.
Permanent insurance, such as whole life insurance, is usually valid until you die and include your investment account. While you are still alive, you can withdraw or borrow against the cash value of the policy. The growing popularity of digital investment could make traditional whole life insurance less attractive as an investment opportunity for the younger generation, Dan said. If you want life insurance to cover death and prevent it from functioning as an investment vehicle, we recommend that you consider term life insurance. Term life insurance covers a certain number of years, has no investment component, and tends to be cheaper than permanent insurance, which is usually sufficient for most people.
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This article was provided to The Associated Press by the personal finance website Nerd Wallet. Georgia Rose is a writer for Nerd Wallet. Email: grose@nerdwallet.com..
NerdWallet: How much life insurance do you need? https://bit.ly/nerdwallet-life-insurance-amount
Copyright 2021 AP communication. all rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.
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