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Why I Bought Whole Life Insurance in My Early 20s

David Rodeck
Life Insurance
middle-aged man explains to friend on the phone why he bought whole life insurance at age 23

When I was young and working my first job, life insurance didn't initially feel like a priority. I didn't think I needed it, and I had many other ways to spend my money — some financially responsible and others less so.

After doing some research, however, I decided to buy a $450,000 whole life insurance policy at age 23. Seven years later, I'm happy (and relieved) about my decision.

Final Thoughts First

When I bought my whole life insurance policy, I didn't actually care about the life insurance part at first. I felt like death was something that only happened to people in their 70s and 80s.

Sadly, over the past decade, I've found out that's not true. I've known many people who have died in their 20s and 30s in car accidents, suicides and fires. Death happens, and if you don't have life insurance, someone else will have to pay for your funeral and other final expenses.

When a friend died in a car accident, it really drove the point home. I couldn't even imagine how her parents coped with her death. Adding to the heartbreak, her family had to start a fundraising campaign to raise the $30,000 needed to pay for her final expenses.

I never want my family to go through that experience. My life insurance policy gives me peace of mind because my loved ones would not have to struggle financially in the event of a worst-case scenario.

The Cash Value Advantage

I first became interested in whole life insurance after I learned these policies build up cash value, which is money you can take out while you're still alive. My cash value grows tax-free every year, and I can withdraw money from it whenever I want. It is important to note, however, that withdrawing or borrowing from the cash value may generate an income tax liability, reduce the account value and the death benefit, and may cause the policy to lapse. Another detail to note is that sufficient premium and account value are necessary to cover insurance costs and charges.

My insurance company guarantees my cash value growth rate, so it's generally safer than investing in things like stocks. At the same time, my money will grow more over time than if I left my money sitting in the bank.

Even when money was tight, I had to keep putting money into my life insurance policy to keep the policy in force. I currently have $12,000 in cash value — money I likely would've otherwise spent.

My sister, who bought a whole life policy at the same time as I did, used her cash value to help pay for her wedding. My insurance company gave me a forecast of my future cash value growth, which is great for planning future goals.

In a few years, I'll have enough to make a decent down payment on a house. If I have children, they'll likely be going to college when I'm in my 50s — and by then I'll have over $100,000 in cash value to help with tuition. And by the time I retire, I'll have an extra $250,000 in cash value.

Ready for Tomorrow with Life Insurance Coverage

I don't have a family now, but I want to one day. When I get married and start a family, I'll definitely need life insurance. With my existing $450,000, I have most of that protection already in place. What's nice is that my insurance premiums on this policy will never increase (premiums always stay the same on whole life insurance).

Since I signed up when I was young and perfectly healthy, I locked in a price discount that I'll keep for the rest of my life. My coverage will never expire, so I don't have to worry about passing a health exam again.

For me, buying whole life insurance at 23 is a decision that looks better and better every year. While life insurance may not feel like a priority when you're young, it can help to look at the long-term benefits of whole life insurance — even if you don't think you need life insurance.

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