When Should I Buy Life Insurance? - Don't wait too long! - Zupnick Associates

(by Jordan Johnson)

“When should I buy life insurance?” is a question on many of our minds, especially if we have financial obligations like a mortgage or dependent children to look out for. 

You can buy life insurance to cover the duration you need it or purchase lifetime coverage through a permanent life insurance option. 

No matter which kind of coverage you decide upon, one thing is clear, the younger, healthier, and fitter you are, the lower your premiums will be.

Insurance Is Cheaper When You Are Younger

The best age for life insurance is the age you are right now. By the time your next birthday rolls around, the cost of your premium could rise by as much as 12%, so time is money.

Those in their 20s and 30s will see the best rates for coverage and the slowest creep in premium costs, which hover around 5% per year for those under 40.

Getting a permanent life insurance policy when you are younger gives the cash value element of the policy more time to grow while the premiums are cheaper, potentially allowing you to pay for the more expensive premiums later in life through accumulated cash value.

Additionally, getting coverage when you are young and fit gives you less risk of developing any kind of medical condition that may raise the cost of a policy or even rule you out completely.

Buying the Right Insurance at the Right Time

Depending on your circumstances, you may find that a particular policy better suits your needs right now. While it’s good to look to the future, there are times when a certain policy just makes more sense.

Term Life Insurance

Term life insurance, the most common type of employee-sponsored coverage, offers level premiums for a set number of years.

Term life is ideal coverage if you have financial obligations that could burden your family or loved ones in the case of your death, which may become less problematic as you get older. 

These obligations might include:

  • Mortgage or personal loan payments
  • Co-signed student loans
  • Financially dependent children
  • College funds for children
  • Outstanding medical or home care bills

As we typically have these kinds of liabilities when we are younger, term life can offer coverage against them at a reasonable cost. You and your loved ones may get a peace of mind from a term life plan, but it may not be the best solution for long-term coverage.

That’s because renewals will typically be much more expensive, especially if you choose any terms lasting over 10 years.

Permanent Life Insurance

Permanent life insurance offers what it suggests, coverage for life, rather than just for a term.

While term life insurance simply offers the beneficiary of a policy a death benefit in the form of a lump sum of cash, permanent life plans also have a separate account, known as a cash value element. 

As the cash value elements of these policies can grow in value over time, they are best started as soon as possible, just like a regular investment account.

Life Insurance Can Be Affordable for Everyone

You don’t have to be rich to have the peace of mind of life insurance benefits. There are different levels of cover that you can use to meet your financial needs and ensure that the pressure is lifted from your loved ones should you die.

In addition to this, the first $50,000 of employer-sponsored coverage can be paid pre-tax if your employer isn’t covering the total sum.

Depending on your financial obligations, the base $50,000 life insurance plan may be suitable, as it will easily cover death expenses and help pay off any outstanding debt. 

Get Covered Before It’s Too Late

If you are considering waiting until you are older until you take out a policy, you might be waiting on borrowed time. Insurers typically place more stringent requirements on those at an advanced age and any medical conditions you do have might rule you out of possible coverage.

Your lifestyle can dictate the cost of your premium too. For example, the Affordable Care Act dictates insurers can charge up to 50% more for those who regularly smoke.

Factors you should consider when you are thinking about life insurance include:

  • Personal and family medical history.
  • If you smoke.
  • Your gender.
  • Your age.
  • Where you live.
  • Your hobbies and occupation.

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