At What Age Should You Buy Life Insurance?

An essential component of buying life insurance is deciding whether to secure coverage. Your age, along with your health and other relevant variables, affects the cost of insurance, so you will obtain savings by getting a policy sooner. The point at which you need to get coverage depends on your circumstances, such as who is dependent on (or will depend upon) you for income or care, in addition to your life's objectives.

Whom Is Life Insurance Best For?

If you have a life insurance plan, your beneficiary receives a death benefit if you pass away. The insurance policy also pays out a death benefit; in addition, some plans contain a savings value, or a cash value, that can be accessed while you are living.

However, in the end, life insurance works best when you have loved ones you wish to provide assistance for after your death. Approximately 54% of Americans currently have life insurance, as stated in the LIMRA 2020 Insurance Barometer Survey. In general, life insurance is used to:

• Pay down overdue debt. 
• Replace lost income. 
• Create an estate for beneficiaries. 
• Help with paying for college or other education expenses for children. 
• Cover final expenses, including funeral and burial costs. 
• Pay death and estate taxes. 
• Make charitable contributions.
• Tax-deferred savings are a good method to build a nest egg, or they can be used as an investment vehicle (if you acquire a permanent insurance policy that accumulates cash value).

Should You Buy Life Insurance in Your 20s?

The more healthy you are, the cheaper life insurance is. As you get older, your health concerns are more likely to crop up, and that could raise your insurance premiums or even render you uninsurable. There is a possibility that having one now will benefit you later in life. If any of the circumstances listed below apply to you, considering getting life insurance now may be a wise decision:

• You have a child support arrangement with your partner or home game that you would like to provide for financially in a worst case scenario. 
• You do not want your next of kin to be repaid for funeral and burial costs. 
• You have co-signed loans, such as student debt or private loans, with your spouse that you do not want your co-signer to be burdened with if you die.
• Your IRA and your pension at work are maxed-out, and you're looking to gain more tax-deferred savings opportunities. You're anticipating the need for term life insurance.

The older you are, the more options you have in regards to the amount of coverage you can afford since coverage costs less as you age. If you need life insurance now, establish a policy that lasts for a set number of years (often 10, 15, 20, or 30) and has an insurance coverage amount that you can afford even if it's less than what you need. Afterward, if your finances improve, you'll have additional funds to purchase a larger policy.

Factors to Consider When Shopping for Life Insurance

When you're considering coverage for protection, consider choosing between term life insurance coverage and permanent life insurance. Term life insurance covers you for a set term, such as five to 30 years, and is more budget friendly, whereas permanent life insurance lasts throughout your life, and is more costly. Your need for protection, the amount of protection you require, and how much you can afford are all relevant factors when deciding what type of insurance to purchase.

For example, if you'd like to provide for your family members while your children are young and until they complete college, a term policy that lasts for at least that many years may be ideal. If, on the other hand, you wish to provide a sum that covers all your funeral expenses, no matter when you pass away, a permanent policy may be more appropriate.

If you prefer having insurance to pay the investment component of a permanent policy, but can't afford the nonrefundable premium amount, you can do so by purchasing a smaller permanent policy and a larger policy to make up the difference. It does not restrict you from purchasing both a term and a permanent policy to satisfy all of your insurance needs.

Before guessing how much coverage you will need with your job's life insurance, remember to consider whether or not you already have life insurance through your job. But keep in mind that your coverage may not be portable and may be more costly if you leave your job.

Pros and Cons of Buying Life Insurance at a Young Age

Pros

• Premiums may be less expensive. 
• Coverage is easier to obtain. 
• It can create a legacy.

Cons

• It is an additional fee. 
• Returns may be better.

Pro: Premiums Are Often Cheaper

The age and state of your health are among the primary factors that influence how much life insurance you have to pay for. If you are younger and healthier, your premiums will likely be lower.

For example, if you're a 25-year-old nonsmoking male in good health, a 30-year term life insurance policy costing $500,000 of coverage would cost you $28.23 per month. However, if you're 40 and also in excellent health, your premiums could cost $51.17 per month instead.

Ascertain your premium using a life insurance premium calculator online.

Pro: Coverage Is Easier to Get

Within the life insurance underwriting process, you often have to complete a paramedical health exam. You may be also asked about your medical history and health status. Because the younger you are, the less probable you are to develop serious issues, insurers are more likely to approve your application.

Pro: It Can Create a Legacy

Early in you career, perhaps you have not had the chance to build substantial assets. Life insurance can help you fill what you would have accumulated over a lifetime spent working, plus it will help leave something for loved ones.

You might be passing on agonies to relatives that you would rather not be responsible for debt. For example, federal government student loans, including parent PLUS loans, may be discharged in the event of the borrower's death, but no comparable protection for private student loans exists.

Con: It's an Added Expense

Life insurance premiums can be expensive when you're young, but may be harder to afford as you get older. If you would like the best coverage but you cannot afford it, you may decide to forgo it.

Con: Returns May Be Better Elsewhere

Although you can make this argument at any age, the younger you are, the more time an investment requires before you begin to see interest in return. This is a result of the nature of compounding interest, also known as interest-earning investments earning interest. Because increasing time means more interest you earn on investments, the more you can invest.

For this reason, some advise that you buy a term-life policy instead of investing in a permanent life policy when you're young, but you'll pay the difference instead of simply purchasing other insurance plan. In this way, life insurance can fulfill the need to save for retirement while accounting for a long-term investment. The trick is to invest the difference.

Investing in the stock market could produce higher returns but could also carry greater risk, compared to, say, the guaranteed cash value of a permanent life insurance policy, which typically offers a fixed rate of return.

Key Takeaways

• Life insurance can be used to cover a range of expenses, including settling final debts or paying outstanding debts. 
• Age and health play a large part in determining life insurance premium rates. 
• The younger and healthier you are, the less you pay for life insurance.
• Term life insurance is usually less expensive than permanent life insurance. 
• You may already possess some life insurance coverage if your company provides it as an employee benefit.

Frequently Asked Questions (FAQs)

Is it too late to get life insurance in my 50s?

If you have loved ones in need of your financial resources, you can and may need to purchase life insurance in your 50s. You'll need to be in good health in order to receive a lower rate, but even if you don't suffer any major illnesses, you may still be able to find a policy.

Should I get whole or term life insurance?

If you're only thinking of your loved ones' financial future in the event of your death, term life insurance is the way to go. The premiums are usually much lower than whole life insurance, and your loved ones are secure. If you want to invest in life insurance as an investment, you may want to take a look at whole life insurance.

Should I buy life insurance for my minor child?

Life insurance is intended as a replacement for the income lost due to the death of a breadwinner. Since you're not financially dependent on your children, you might not need to provide life insurance coverage in their names. Some folks choose to purchase a child's life insurance policy later on insurability, financial purposes, or cash value to be redeemed at a later date in case of a whole life insurance policy.