Chatting over pizza and drinks after work
It actually started with a conversation over pizza and drinks after work with my manager Tony about what he did when he first left university and started out by himself. He said he’d always wanted to have a year off after finishing his studies and take a gap-year break, maybe backpacking around Europe with some mates before he settled into job and became an official tax payer.
Tony also said the first thing he did was get a life insurance policy in place before he made any real plans. I was actually a little surprised by that. My understanding was that if you don’t have a family why would you want life insurance?
Because life happens
Tony shared how his own father had died in a truck accident when Tony just turned 18. Even though his parents were separated, his father still remembered to have a life insurance policy in place naming his son Tony as the policy beneficiary.
When a parent dies - the kids suffer
Having to deal with the loss of his father and a grieving mother was hard but his father's life insurance payout was enough for him to buy a small house outright and actually have some cash left over that paid for him to go to university without the need to get an HECS student loan.
When parents plan ahead for the unknown - kids do better
Tony said that ‘not being forced to leave home and move away from his mates and familiar surroundings’ during the time when the bottom fell out of his life, actually kept him from going off the deep end and gave him an incredible head start to make something of his life. You could tell it was a bittersweet memory but you could really feel the gratitude for his father's good decision in his voice as he remembered it.
Why bother with life insurance if you're single?
So I guess I could understand why getting his own life insurance policy in place early was number 1, but he didn’t have a partner or family when he first started work either. As we talked more about what it felt like to get a head start at a really hard time in his life, the idea of getting my own life insurance policy began to make more sense to me. "Sure, there is always a cost to consider, but I’ve actually considered what I would save with an early start. And if that really bothers you, pay if from your super fund."
I reckon Tony was going to have a hard time convincing me on this one.
Some day I will probably partner up ...
At the moment I’m paying off my HECS student loan and working on the credit card. I don't have a partner yet and still enjoying dating. But if I’m realistic I know someday I'll partner up, hopefully, have an amazing relationship with all the usual stuff that comes with that; friends with little kids, probably a dog, a premium Netflix account, potentially a crazy aunty and a hot sister-in-law who gets on with me way more than her sibling ever did.
But I don’t have that now, so why would I think about taking out and paying for life insurance again at this stage of life? “That’s easy” said Tony.
The younger you are the cheaper it can stay
Basically, the younger you are when you start a policy, the lower the cost it usually is to insure you. As you get older your health might change and you may even have a higher risk job.
- Being young and healthy means your insurance premiums are usually much lower.
- Starting later in life means you run the very real risk of paying high premiums (or worst still, being classed as uninsurable).
Leave it too late and ...
“If that happens, your family will have to shoulder all the risks in life. If you can't transfer the risk to an insurance company, you have to hold the risk yourself so you'd probably end up living a smaller life. And, be sure to speak with a professional adviser and ask about locking in your policy premiums at today’s prices, so you can keep a lid on the premiums as you get older".
People don't mind paying for value
When you stop and see the value, it actually does makes sense.
“So for the price of a pizza a month, I have a $1,000,000+ life insurance policy and am saving myself tens of thousands of dollars by simply starting early. The best part is, I pay it automatically once a year from my superannuation fund and not from my pizza budget. Woo hoo!”
Talking with mates and sharing insights - its good for everyone
My conversation with Tony was really eye-opening and I learned some important stuff that nobody ever stopped to share with me. Who’d have thought that a simple financial decision early on can save you tens of thousands later on. Now I know my future self is going to appreciate my first chance at looking ahead to where my life is going.
Now I tell my mates, “Start thinking about what level of cover you might want – (there is a helpful video on this website called ‘How Much is Enough’).
Then when you’re ready, chat with a financial adviser about what you can achieve by starting early on one of the sensible parts of life.
Make it a first, today.