There comes the point in life when many wonder when to purchase life insurance or simply ask themselves, “Why should I buy life insurance?” Deciding when to get coverage depends on your age, health, and various other personal elements.
Moreover, the personal aspects that play a role in buying life insurance revolve around your family size and financial security. Being that your age and health play a role in the cost of insurance, your household and monetary stability become the ultimate determining factors.
Reasons People Need Life Insurance
Understandably, people in their 20s are not adding life insurance to their list of financial responsibilities, especially if a person is single with no children.
However, if marriage or children seem to be an instance in your near future, then life insurance should be added to your list of priorities no matter your age. Here are some common reasons people decide to get life insurance policies:
- Having a baby or being pregnant
- Planning to get married
- Financially supporting aging parents
- Having debt
- Being self-employed
- Partaking in extreme hobbies or sports
- Working in a high-risk job
Though all the situations listed above are valid reasons to purchase life insurance. The most important reason to do so is when someone else depends on your income.
Not everyone needs a life insurance policy in place if they have a large sum of money put aside or other financial cushions to fall back on, but for others, it can be costly not to have one.
How Dependents Affect Your Decision?
If you have individuals that depend on your income, then their world will look very different if you were no longer in the picture. A savings account you leave behind may be sufficient to temporarily support one or two dependents, but it may not go far enough.
The point of life insurance is to replace your income to allow your family to stay in their home, have food on the table, and keep up with the monthly bills.
So if you are asking yourself at what age you should get life insurance, then you should think about what your survivors will do after you pass. If your conclusions revolve around them struggling to get by, then you absolutely need a life insurance policy.
When should I buy life insurance?
You should buy life insurance when you have children or are planning to get married. Having this type of difficult money conversation before marriage can even prevent a divorce or your spouse from struggling financially at the time of your demise.
Assuming you do not need life insurance is one big mistake that younger people make. Though the odds of not dying in your 20s or 30s are in your favor, anything can happen, and your life circumstances play a bigger role than your age.
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Here are some things to consider when looking at life insurance quotes and deciding when to buy a policy:
- How your family or loved ones will pay for your funeral and cremation/burial expenses
- Having co-signed debts with a friend or family (can be a student, car, or personal loan)
- Knowing you will need life insurance someday
- Providing for your spouse or children
If any of those factors are a concern of yours, then the time to buy a life insurance policy is now. Yes, you are less likely to pass away at a younger age, but that does not mean you are guaranteed not to die young.
Insurance Can Be Cheaper When You’re Younger
You get cheaper monthly premiums when you are younger. Following life insurance rates by age chart is a good way to decide on when to buy life insurance if you do not have anyone depending on your income at a younger age.
Buying a policy that lasts up to 20 or 30 years when you are younger can save you money in the long run. The younger and healthier you are, the lower your insurance premiums will be when looking at life insurance quotes.
As a 20- to 25-year-old non-smoker, you can end up only paying around $25 per month for a $500,000 life insurance policy that lasts for a term of 30 years. At the same time, you could end up paying around $50 per month for the same policy as a healthy 40-year-old.
The price jumps by at least half the amount as you double in age, and it can increase more than half that sum if you deal with medical issues at a later age. Beyond the cost, being approved for a policy at a younger age is easier since you are less likely to suffer from health issues.
The Amount of Life Insurance You Need
One of the many signs you are a great parent is planning ahead, and buying life insurance is a way to prepare for the future. Even with savings accounts large enough to cover burial expenses and bills for a year or so after you pass, life insurance can help pay for your child’s future education expenses.
At the very least, it can merely serve as a mini-inheritance to be used when your child enters adulthood.
The average coverage available for life insurance policies is between $10,000 and $10 million, but your income determines what you can qualify for.
As a rule of thumb, insurance companies recommend your purchase a policy that equates to six to 10 times the amount of your annual income.
Another alternative to calculating your policy coverage is by multiplying the number of years left until you retire by your yearly salary. Doing this either way replaces your current yearly income by a number of years. That way, your family has time to replenish the amount of income you provide to the household.
For example, if you bring in $30,000 a year, then a $250,000 insurance policy would replace your income for at least eight years after you pass. Of course, how long the funds last will depend on how your family spends them.
Alternatively, if you have a mortgage loan for $250,000 out with your spouse, buying a $500,000 policy could cover the mortgage and replace your income for those three years.
Ultimately, how you want to provide for your family after your death determines the amount of coverage to take out.
How do I buy life insurance after getting rate quotes?
When you decide that you want to buy life insurance coverage and how much you want to buy, you should shop around for the best policy options and the lowest quote.
Depending on the amount you wish to take out, the provider may require you to undergo a medical exam, but many provide this free of charge.
Remember that your age, health, and other factors determine your rates, so start your search as soon as possible and when you are as healthy can be.
Once you decide on the company with the lowest quote and best policy, be sure to thoroughly read the policy agreement, especially the payout options, before signing and paying your first premium.