When Should You Get Life Insurance?

People in their 20s and 30s probably aren’t spending a lot of time thinking about their death. However, this is the best time to purchase a life insurance policy. Rates are the lowest for young and healthy people.

Life insurance rates increase by 8-12% each year you age.

What To Think About

The need for life insurance has a great deal to do with your stage of life. Whether you’re interested in protecting your loved ones or want to avoid saddling family members with any unpaid debts, it’s an affordable option to protect the financial security of the people you care about. Other important considerations include:

  • Getting married
  • Having children
  • Getting a home mortgage
  • Credit card debt
  • Unpaid student loans

Life Insurance For Married Couples

If both spouses are employed and contribute equally to the financial situation in the marriage, they may choose to wait to buy a life insurance policy until they purchase a home or decide to have children. If you or your spouse could survive financially, even after funeral expenses, without having to sell property, relocate to a different city, or change jobs, then life insurance may not be unnecessary.

However, if the death of a spouse would cause financial hardship, it’s a good idea to consider purchasing a policy that would alleviate that strain. When deciding on the amount of coverage you might need, a common rule of thumb is to multiply their yearly salary by 10-12x. This amount will take care of the financial security of the surviving spouse long enough for them to get back on their feet and pay off any shared debts.

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Life Insurance For Households With One Income And Children

This may be the stage in life that demands the most careful consideration. When everyone in the household is dependent on one wage earner, there is a great need for a life insurance policy that will financially provide for their future.

A parent that stays home with young children and provides support for older children brings tremendous economic value to the household, even though they don’t get a paycheck or a benefits package. The family should carefully consider whether they’d need to have enough money to hire a full-time nanny to care for the children since the surviving parent would need to continue to work to support the family.

If there is a parent or caregiver in the family that doesn’t work and stays home to care for the children, that person also needs a life insurance policy that can provide care for both the children and the home in their absence.

Households with young children and one income are in the greatest need of a sizeable life insurance policy that will help to keep the home situation intact in the event of an untimely death. In this situation, it’s important to address the need for life insurance right away.

Life Insurance For Households With Two Incomes And Children

In this case, the death of either adult in the household presents a financial hardship that could be easily alleviated with a life insurance payout.

Both parents or caregivers need a life insurance policy that will not only replace their income, but will also pay off a mortgage if there is one and take care of any outstanding debts.

It’s also a good idea to plan for the future educational needs of the children. Consider providing for college education expenses and living expenses with a life insurance policy, as well.

In a dual-earner household with children, the need for life insurance is immediate.

Life Insurance For Young Single People

There isn’t a one-size-fits-all recommendation for young single people when it comes to buying life insurance. At this stage of life, your financial situation matters most.

If no one depends on you for financial support and you have enough cash on hand to easily pay off all your debts and provide for burial arrangements, your need for life insurance is minimal. Some young people who don’t have anyone who depends on them for financial support choose to forego life insurance completely at this stage.

Rates for term life insurance for people who are young and healthy are typically low. For this reason, many financial advisors and insurance agents say it’s a great time to buy a policy so you can “lock in” a good rate.

Before purchasing life insurance at this stage of life, consider whether the money may be better used as an investment. Purchasing life insurance is a personal decision, so if you want to buy a policy, chances are it won’t cost much.

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Life Insurance For Business Owners

People who may not otherwise consider their need for life insurance may decide to purchase a policy if they are business owners with partners who count on them.

A life insurance policy for a key employee or business owner could protect the business in the event that the person dies.

Business partners may agree to buy out the other person in the event that either of them dies before they retire so the business can continue. They could take out term life insurance policies and name each other as the beneficiary to make sure they can purchase the business without enduring financial hardship.

The time to consider buying life insurance as a business owner or key employee is sooner rather than later. In many cases, a term life insurance policy is ideal, but keep in mind that rates go up with the insured’s age.

Life Insurance For Parents With Older Children

For parents who are still in the work force and whose children are grown and self-sufficient, the need for life insurance may not seem urgent.

Whether to buy a life insurance policy at this stage of life is completely dependent on individual financial circumstances. One major consideration for people in their 50s and 60s is the price of a life insurance policy.

Now may be a good time to consider a permanent or whole life policy since this type of life insurance remains in effect until you die. It’s more expensive than term life insurance, but there’s an investment portion of the policy that your heirs will get in addition to the death benefit.

Life Insurance For Retired People

People who are retired or approaching retirement age have probably been in the workforce long enough that they are generating an amount of income that could pay off their debts and cover funeral expenses without causing financial hardship for their loved ones if they die unexpectedly.

When it comes to deciding when to buy life insurance, age matters less than individual financial circumstances and family situations. There’s not a perfect amount of life insurance to purchase when you turn 25 or 55.

Since everyone’s situation is different their need for life insurance, and even the type of policy they purchase is different as well.

Why Young People Should Have Life Insurance

Life insurance is less expensive for younger healthy people because they present less of a risk for the insurance company. Term life insurance is the most popular option among young people because it is simple and inexpensive. The premiums don’t change with term life insurance, so if you purchase a policy while you are young, you’ll enjoy lower rates even if you have health challenges later in life.

Having a life insurance policy is an important part of a comprehensive financial plan. It’s important to consider the impact your death may have on your loved ones. Who would be in charge of making your burial and funeral arrangements? Do they have immediate access to $10,000+ in cash to cover the associated costs?

If you plan to marry or have a family someday, you can lock in a low premium rate that won’t change during the term of the policy. This could save you a sizeable amount of money over the years. A comparable policy at age 50 costs up to $200 more per month.

Many employers offer term life insurance at a discount as part of their benefits package. Because most people change jobs every few years, it’s smart to purchase a policy independent of your employer.

A convertible term policy may be a good fit for someone in their 20s or 30s. It allows you to take advantage of low rates while you are young and in good health.

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