The Importance of Life Insurance at Any Age
Have you ever wondered what the perfect age is for purchasing life insurance? Here's a hint — right now! Here's why:
A life insurance policy pays your beneficiaries for expenses they will incur after you die. For instance, your spouse, children or parents might need additional income for basic living expenses, funeral costs, tuition, retirement income or estate taxes.
Despite the advantage of life insurance, Investopedia, an online source of financial information, reports that only four in 10 individuals purchase a life insurance policy. Many individuals believe that payments for things such as cell phones, cable and the Internet are more important than insurance premiums.
When you purchase a life insurance policy, you pay the insurance company a monthly premium in return for the company promising to pay a death benefit to your beneficiaries. The rate you pay is based on your medical history and takes into account you and your family’s health history and whether you are a smoker or have a dangerous job or hazardous hobbies.
The insurance company's rate for your policy won't change during the term of the policy. But for every year you put off buying life insurance, premiums increase. Someone in their 40s can expect to see annual rate increases of five to eight percent, while someone in their 50s may be paying as much as 12 percent more per year for putting off their decision.
That's why it's a good idea to purchase life insurance while you’re still young. Since the premium doesn't change during the life of the policy, you could save hundreds of dollars a year when planning ahead.
While many experts agree it's best to purchase insurance when you are under the age of 35, there are benefits for purchasing insurance at any age.
While there's disagreement over whether you should purchase life insurance for an infant or child, there are some benefits. The policy's cash value grows tax deferred and can be transferred to the child when they are 18 years old. They then can make the decision to either continue paying the premiums or take a payout if it has equity. If the policy is held long enough, its cash value can be used to supplement retirement income.
Under Age 35
Even though the optimal time to purchase a life insurance policy is in your early 20s and 30s when costs are low, Investopedia estimates that more than half of policyholders are 45 years or older.
A 30-year-old who has no health issues can get a 30-year level term policy with a $100,000 face amount for about $156 per year. A 40-year-old male could pay about $216. Therefore, the overall cost of delaying the purchase for 10 years is $1,800 over the life of the policy.
Another benefit of buying a policy when you're younger is that you're also probably healthier. Insurers check an applicant's medical history, and can require a physical exam to determine if you should be paying a higher premium or whether the application for coverage should be denied.
50 Plus Years Old
Many people nearing retirement age don't need life insurance. Usually they don't have people relying on them financially and have payed off long-term expenses such as a mortgage or car loans.
Still, individuals who haven't purchased a policy and have beneficiaries they want to cover should consider purchasing a policy. One option – if you’re in your 50s – is to purchase a traditional 10 to 15 year term life insurance policy, which would have a lower premium.
If you can't qualify for term life insurance, you may want to look at life insurance policies known as "final expense insurance." One option is simplified life insurance. There's no medical exam and you might be able to get coverage as high as $40,000. This type of policy is expensive.
Another option is guaranteed life insurance. As its name implies, this is guaranteed coverage as long as you don't have HIV/AIDS or terminal cancer. Keep in mind that this type of coverage has high premium and low death benefits, usually maxing out at $25,000.
If you're unsure what type of policy is best for your age, don't waste another day. Talk to a broker today.
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In this issue:
This Just In...
The Likelihood of Medicare for All
How to be a Caregiver Without Taking a Major Financial Hit
The Importance of Life Insurance at Any Age
When Euthanasia and Life Insurance Intersect