Fidelity Life: Gen Z Financial Planning Trends and Why Adding Life Insurance is Important

Gen Z is generally defined as anyone born between 1996 and 2012. That means a large chunk of Gen Z is entering adulthood and beginning to earn an income. They’re also digital natives. They grew up with the Internet and social media and are quite comfortable navigating these technologies.

Gen Z is considered the next set of policyholders for insurance companies, a generation that takes life one step at a time and practices living in the moment. Their life goals are different from their parent’s as they seek quick results and better returns. The generation is changing the way industries function across sectors. Unlike the previous generations, Gen Z is more aware of their spending and savings. Financial planning is an aspect that the majority of Gen Z practice for a secured future.

This article will cover a few financial planning trends seen among this generation, then dive into several types of life insurance policies for Gen Z, including term life insurance and several types of permanent life insurance. LIMRA’s 2022 study shows 42% of Gen Z individuals are financially insecure and one of the ways to ease these concerns is life insurance.

Gen Z Financial Planning Trends

Unlike the previous generations, Gen Z is more aware of their spending habits and savings goals. Financial planning is an aspect that the majority of the Gen Z practice to secure their future. As Gen Z grows into adulthood, key elements that factor into their financial planning are emerging:

1. Self-Awareness Regarding Lack of Knowledge

According to an Investopedia survey, only 46% of Gen Z feel confident about their financial knowledge — much lower than Boomers, Gen X, and millennials, who were over 50%.

Every generation is less confident while young, but Gen Z has so many sources of information these days that information overload may cause them to be unsure of what to trust and what to ignore.

2. Concerns About Debt

Gen Z grew up seeing millennials burdened with student debt. Many of them are burdened with student debt themselves. Plus, many may have seen their parents struggle with debt through the Great Financial Crisis and the COVID-19 pandemic.

Consequently, many of them may be worried about taking on debt or unsure how to manage it wisely.

3. Digital Banking, Digital Investing, and Cryptocurrencies

All the information at Gen Z’s fingertips may make it hard to know what to trust, but it also has made Gen Z enthusiastic about saving and investing. The Investopedia survey mentioned found 54% of Gen Z have invested in something.

This is likely because of online banks and digital investing companies like Robinhood. These make opening a bank account and saving or opening a brokerage account and investing as easy as a few button clicks.

Many Gen Z’ers are investing in traditional assets like stocks and ETFs, but cryptocurrencies and non-fungible tokens (NFTs) are also a big trend.

Types of Life Insurance Policies For Gen Z

Gen Z has plenty of life insurance options to choose from. Since they’re still young, they can lock in low premiums for the coverage they need.

Here are some of the best policy types to consider:

1. Term Life Insurance

Term life insurance lasts 10 to 30 years, depending on the policyholder’s choice. The policyholder risks outliving their policy, but premiums are cheap — especially for young Gen Z’ers.

2. Whole Life Insurance

Whole life insurance is a form of permanent life insurance, meaning it lasts for a lifetime if the policyholder keeps up on their premiums. Premiums cost more than term life insurance, but a Gen Z policyholder can lock in rates while young to save money.

These also come with a cash value savings component. Part of each premium goes into this cash value component, which grows tax-deferred at a fixed rate. As a result, these can be great wealth-building tools for Gen Z.

Once this cash value grows enough, policyholders can tap into it via low-interest, no-credit-check loans or withdrawals. If the policyholder surrenders the policy, they get the full cash value minus surrender charges.

3. Universal Life Insurance

Universal life insurance also lasts a lifetime, but the policyholder can adjust their death benefit. Increasing the death benefit may require a medical exam and higher premiums, whereas decreasing it could reduce premiums.

The cash value grows based on current interest rates.

4. Indexed Universal Life Insurance

Indexed universal life insurance works the same as universal life insurance in terms of premiums and death benefits, but the cash value is invested into funds that track market indexes, like the S&P 500.

This offers more growth potential, although cash value can decrease when the market falls. However, the insurer typically offers indexed universal life insurance policyholders a minimum rate guarantee to ensure there is some growth.

5. Variable Life Insurance

Variable life insurance works the same as indexed universal life insurance, except instead of investing the cash value in indexes, the policyholder can pick individual stocks, bonds, and similar assets for more growth potential.

However, the insurer generally won’t offer a minimum rate guarantee. This can put the cash value at risk of investment losses.

Gen Z is Growing into Their Finances

Gen Z has access to more financial information than any generation before, thanks to the Internet and social media platforms. This has made Gen Z enthusiastic and savvy regarding investing and saving for the future, but debt is still a worry for them. A key piece of Gen Z financial planning is life insurance, as Gen Z can lock in the best rates on the coverage they need while young.

There are plenty of policy options to fit any budget, wealth-building, and coverage needs, from term to whole to variable life insurance and everything in between. Ultimately, Gen Z policyholders should consider their needs and goals before getting a life insurance policy, then shop for multiple quotes to find the best rate.

Fidelity Life offers a variety of term life insurance for millennials. Life insurance shoppers can discuss their options with an agent or shop for online life insurance quotes. Shoppers just need to answer a few questions before being matched with a policy that suits their needs.

Fidelity Life offers term life policies and makes it easier for people to get them. Applicants provide information to help match them with a life insurance policy that meets their needs, and can select online or with the help of a licensed agent. Fidelity Life will then guide the applicant through the application and purchasing process.