The earlier you buy life insurance, the better…and cheaper. To find out why, read on.
[Editor’s Note: This blog was originally published on December 2, 2015. The content has been updated.]
Life insurance is one of those things a lot of people don’t really want to think about until they’re “older.” I get it. People don’t want to think about dying…and most young people assume they’ll have time to deal with the issue later.
But that doesn’t mean they shouldn’t start thinking about life insurance NOW.
Life insurance is an important part of your overall financial plan. The sooner you get started putting that plan into action, the greater benefits you’ll reap.
Here are 4 reasons why buying life insurance at a young age is a smart move.
1) Lock in cheaper premiums
The younger you are, the cheaper your premiums will be (all other things being equal). Insurance companies figure that you’ll probably live for a long, long time…and keep sending them money along the way…and they set your rates accordingly.
As your age climbs, so do your premiums for a new policy. In addition, the older you get, the more your rates increase over the previous year. For example:
A 25-year old non-smoking man in excellent health may be able to get a 30-year, $500,000 term life policy for $32.35 a month. What would happen if he waited to get covered? Assuming his health never declines, here’s what his monthly payments would look like:
25 yr. old — $32.35
35 yr. old — $39.14
45 yr. old — $85.55
55 yr. old — $258.87
The difference between the 25-year old and the 35-year old is almost $7 a month. But the difference between the 35-year old and the 45-year old is over $46 a month.
Waiting 10 more years adds over $173 to the monthly premium!
2) Get coverage before you become uninsurable due to injury or illness
Your health is a major factor that determines how much you pay for life insurance. Poor health makes you more likely to die early, so insurance companies charge more to compensate for that risk.
Accidents happen. Sickness can sneak up on you. And when these things take their toll on your body, your rates can go way up. If your health takes a serious hit, you may be deemed “uninsurable” when you finally do apply for coverage. At that point, your life insurance options are limited and your policy options will be costly.
Buying life insurance before injury or illness strike can prevent this from happening. Once your policy is in force (and as long as you pay your premiums), it cannot be canceled, and your premiums can’t be raised by the insurance company for health reasons.
(This is one of the biggest reasons to buy whole life insurance for children!)
3) Protect your loved ones from your premature death
We all hope to live a long, full life…and we hope to have our financial house in order when we die. But what if you pass away before your time?
We buy life insurance to protect our family’s financial future when we die. But the truth is, we don’t know when we’re going to die. Doesn’t it make sense to buy sooner rather than later…to make sure we’re prepared for the unexpected?
Even if you’re young, you should keep a few things in mind:
- If your parents co-signed any of your debt (like student loans, car loans, etc.), they may be responsible for those debts if you die before paying them off
- If you’re the one taking care of your aging parents, what will they do if you die? Life insurance can provide for them when you’re not able to
- Have you put off buying life insurance because you’re single with no kids? If you want to get married and have children in the future, you may be glad you already own life insurance
Buying life insurance in your 20s or 30s doesn’t sound crazy anymore, does it?
4) Accumulate cash value
A permanent life insurance policy can be a rock-solid component to your long-term financial strategy. These policies develop guaranteed cash values that you can access at any time, for any reason. Yes, this is a life insurance benefit you can enjoy while you’re alive.
The cash values grow each year, and over time, can help you pay off those student loans, make a down payment on your new car or house, or finance a fancy wedding.
Watch the video below for a better idea of how this works with whole life insurance:
It’s no surprise. I think buying life insurance at a young age is a no-brainer. Ultimately, the choice is yours to make. If you have any questions about how life insurance fits into your plans, give us a call at 800-442-9899.