This article was produced in partnership with Beneva.
David Saric, of Insurance Business, sat down with Matthew To , CFA, CFP senior director of business development investments at Beneva, to discuss how insurance can help millennials navigate their first home buying experience and today’s difficult economic landscape.
As millennials reach home ownership maturity, it is more important than ever for financial advisors to use their resources and insight to guide this group through challenges affecting the real estate market and personal finances.
“Insurance is important because of the high debt loads millennials carry relative to other generations,” said Matthew To (pictured), Beneva senior director of business development and investment. “If one of the earners pass away, paying the mortgage will put an immense amount of stress on the surviving family members.”
Millennials tend to have higher levels of debt than previous generations, as a greater proportion have acquired a higher level of education.
They have also dealt with the financial crisis of 2008 and economic fallout from COVID, which has affected their earning potential and resulted in delays in settling down and starting families.
Meanwhile, a rapid increase in home prices and mortgage rates from historic lows over the last decade has meant many need a dual income household to afford a home.
Social media pressures have also led some millennials to pull the trigger early and purchase a home without being properly educated in the process.
Key challenges faced by millennials looking for home ownership, according to To, include:
Equipped with the knowledge that loss events can happen without warning, advisors can help illustrate the safeguards that an insurance policy can provide millennials.
Life insurance can provide financial security in the event a homeowner was to pass away unexpectedly and ensure that surviving family members are not “left with an unmanageable level of liabilities,” To said.
Disability insurance can also help maintain an individual’s quality of life.
“During COVID, there was a surge in mental health disorders such as anxiety, depression and stress,” To said. “Having insurance would be beneficial in this situation and beyond.”
Critical illness (CI) insurance coverage can also offer further protection.
“Given the high debt loads millennials already carry, having CI is vital in case they are faced with a fatal disease that will cost their family heavily during treatment,” To said.
Advisors can also tap into their risk mitigation expertise to help millennials practice better financial security habits.
First and foremost, stowing away “rainy day” funds is something that consumers need to get in the habit of, especially since To pointed to the threat of a recession or mass job layoffs.
Reducing discretionary spending is also beneficial advice an advisor can give to a client looking for a less stressful home buying experience.
“According to a recent RBC report, millennial homeowners are set to face substantial economic hardship within the next few years due to the combination of rising job losses and high debt loads,” To said.
“Older millennials, adults aged 35 to 44, had debt-to-disposable income ratios around 250% in 2019, while that metric was roughly 150% for the same age group in 1999.”
Investing in a diversified portfolio through an advisor should be encouraged over caving to the latest investment fad propagated on TikTok, YouTube, Reddit or other social media channels.
Additionally, millennials may factor ESG values into their investment appetite, and To recommended tapping into this interest.
With a plethora of coverage options available, Beneva has also tailored its product platform to serve the needs of millennials in the following ways:
For extra resources to help address the unique concerns of millennials, To recommended that advisors and consumers should visit the following links:
