Do you remember how old you were when you purchased your first car or your first house? Considering how important these are to everyday life, most people probably recall quite well when these significant life events took place. Now, do you remember how old you were when you purchased your first term life insurance policy? This may not be as easy to remember, but it’s equally as important. Purchasing life insurance signifies a time in your life when you become more financially responsible and able to protect your loved ones.
But how do you know when the time is right to buy a policy? How old should you be? Can you be too young or “gasp” too old? Let’s explore some of these questions in more detail.
The first thing you should consider is there will always be a need for final expenses. According to Funeral-Tips.com, the average funeral costs between $7,000 and $10,000. Even if you have no dependents or outstanding financial obligations, you should consider a small policy to cover funeral costs. This will relieve your family members from the burden of paying for a funeral.
Buying Too Young
Many people wonder if it’s necessary to buy term life insurance at a young age. The answer is maybe. If you don’t have any dependents, debt or other financial obligations, you can probably forego coverage. On the other hand, if you have a young family or perhaps college loan debt, you need coverage, regardless of your age.
Life insurance premiums increase as you age. Once you ‘lock-in’ the rate on a policy, it will not increase until the policy expires. But if you wait to buy, here’s what it could look like:
- 25-yr old Male, $500,000/10-yr policy: $170.00 Annually
- 45-yr old Male, $500,000/10-yr policy: $370.00 Annually
- 65-yr old Male, $500,000/10-yr policy: $2,575.00 Annually
Another consideration when buying young is the policy term length, such as 10, 20 or 30 years. If you choose a shorter term length such as 10 years, the policy will expire long before your insurable years are over. You will likely need to replace it with a longer term policy or a permanent policy as you get older. Most term life insurance policies also give you the option to convert to a permanent product during a specific time period or before a certain age.
Buying Too Old
So, we know the longer you wait to buy, the more expensive the term life insurance policy will be. However, there is a ‘sweet spot’ where the cost at the time of purchase may stay about the same in your late 20’s to early 30’s. You can read more about this in our blog ‘Term Life Insurance: Don’t Wait For Another Birthday to Pass!’
Another consequence of waiting too long is medical problems and other risk factors may increase the price of your policy or jeopardize your chances of getting coverage altogether. It’s generally better to get a policy secured before any risk factors pop up. Not only will this keep the cost down, but you won’t have to worry about becoming uninsurable.
Regardless of the increased costs that come with age, if you need coverage at an older age buy it! If the need is there and the cost is affordable, then it’s not too late.
What Age is Right for You?
We recommend purchasing a term life insurance policy if anyone is dependent upon you for financial support, or anyone would suffer a financial loss should you die prematurely. Also, remember there will be final expense costs even if you don’t have dependents or financial obligations. Here are some examples of common life events that warrant new coverage or additional coverage.
- Getting married
- Having children
- Buying a home
- Starting a business
- Going to college and using student loans
Tell us why you bought, or are looking to buy, term life insurance!