The decision to purchase life insurance can give you peace of mind that your loved ones are cared for no matter what the future holds. But when, exactly, is the right time to get life insurance? By focusing on your specific concerns and unique situation, you can clarify the options that best suit you while avoiding spending more on coverage than you need or want.
Life Insurance in Your 20's
The 20's are an age when many assume that life insurance coverage is not necessary; however, it does offer some definite benefits. A policy that at least covers any debts or financial burdens you may leave behind for your loved ones is prudent.
What type of policy should you get in your 20’s?
If you are considering a policy in your 20's, it is not necessary to obtain a whole-life policy. You can opt for a term-life policy, instead. The advantage of a term-life policy in your 20's is the low premium and the reasonably high payment if the worst-case scenario occurs. Since young people have a lower risk of death by illness, your primary risk is suffering an accident or similar incident. An insurance provider will often offer more coverage for a lower premium, particularly when you opt for a term-life policy.
The downside of a term-life policy is that you will need to renew the policy. Terms in a life insurance policy vary and may range from one year to 20 years, so evaluate your options before purchasing a policy.
What should your policy cover?
Generally, you want a policy that covers your funeral costs and any existing debts that you don’t want to saddle your loved ones with. If you have children or a spouse, then you may consider additional coverage to help them pay for living expenses while going through the grieving process.
Life Insurance in Your 30's
In your thirties, you may find that you have more people depending on you and more responsibilities. If you’re in your thirties, you have a greater chance of a spouse or children who depend on your income. You may also carry more debt, like a mortgage on a home. This is the age when life insurance can go from helpful to necessary for your loved ones.
What type of policy should you get in your 30’s?
Going into your 30's, there are benefits for choosing either a whole-life policy or continuing with term-life coverage. The advantage of buying a whole-life policy in your 30's is the opportunity to maintain a low premium as you move into older age. In your early 30's, you may be able to obtain a policy for a low monthly premium while covering as much as $500,000 or more in the event of your untimely death.
A term-life policy retains a lower rate for individuals in their 30's, but it does expire after the stated time period.
What should your policy cover?
Generally, you want a policy that covers the cost of any remaining student loans, a mortgage and your funeral costs. If you have children and a family, then you also want a policy to help pay for your loved one's cost of living for a set amount of time, ideally 5 to 10 years.
Life Insurance in Your 40's
As your children are getting older and your life has more financial obligations, your need for life insurance coverage becomes even more important.
What type of policy should you get in your 40’s?
When you reach your 40's, you may want to re-evaluate your life insurance policy. A term-life policy may not fit your needs or may end up with higher costs than a whole-life policy due to the increased potential risks to your health that come with older age. You may also have more financial obligations due to your lifestyle and activities than you had in your younger years.
Before evaluating your options, clarify your current coverage and any changes that may impact your financial obligations.
What should your policy cover?
As opposed to the minimal debts you needed to cover in your twenties, you may need to consider larger expenses that could be passed onto your loved ones in the event of the worst case scenario.
- Are you paying for your child’s college tuition?
- Are you living in a house with a mortgage that’s significantly higher than the home you purchased 10 or 20 years ago?
- How much has your personal debt increased over the past decade?
When you have an idea of your financial obligations, look at your current policy. If the policy is not adequate or is a term-life policy that may expire in the near future, you may want to consider changing your policy. You may benefit from a whole-life policy and purchasing the policy in your 40's will reduce the rate compared to waiting until you’re older.
Life Insurance After 50
When you reach your 50's, you need a life insurance policy to protect your loved ones from financial burdens if you pass away. The possibility of facing age-related health concerns increases as you grow older. Although you may expect to live for some time, you still want to ensure that your loved ones are not facing a financial burden if something unexpected happened.
What type of policy should you get in your 50’s?
If you have not purchased a whole-life policy, you may want to consider the plan when you reach your 50's or an older age. One benefit to whole-life is that the policy doesn’t expire. As long as you pay your premiums, your coverage continues until your death.
Another benefit of whole-life coverage is the savings feature, where part of your premium is invested and has the potential to grow over time. You can typically borrow against the cash value of a whole-life policy while you’re still alive -- you could even use the cash to pay your premiums and keep your policy intact should an unforeseen financial crisis occur.
What should your policy cover?
If you have already paid off your debts, then you may be able to consider lower coverage for your policy. For example, you may not need coverage to pay off a mortgage or student loans, but you still want to cover funeral costs and a spouse's living expenses for a time. Evaluate your financial situation and the potential costs your loved ones may face before selecting a policy.
A good rule of thumb with a life insurance policy is the earlier you get it, the better. By purchasing a policy at an early age, you get a low premium and protect your loved ones from financial burdens. But it’s never too late to get coverage. The benefits of a policy are undeniable. Getting a life insurance policy at any time can give you peace of mind if you have dependents, debts or concerns about the loved ones you would leave behind.