UPDATED: Mar 26, 2020
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For many, your 30s are all about milestones like marriage, a new home, and starting a family. Even if you’re untethered, you might have some other important familial responsibilities on your plate.
While you’re grateful to have left behind the insecurities of your 20s, and tackling the new challenges of your third decade, don’t forget to do one more thing — buy life insurance.
Before you roll your eyes and click away to visit your favorite subreddit, here’s why buying a term life policy in your 30s is a smart idea.
Why Do 30-Year-Olds Need Life Insurance?
For most 30-somethings, life insurance is a must-have.
A common misconception is that life insurance is just for funeral costs. That’s true if you only get enough coverage for that, but being young and healthy has its advantages, like paying less for more (but we’ll get to that later).
If you’re in your 30s and any of the following apply to you, you probably need life insurance.
1. People Depend on You
The most obvious reason to have a life insurance policy is to make sure your family is taken care of should you pass away. On average, it costs $233,610 to raise one child from birth to age 17. Without your income, would your family be able to maintain your current lifestyle without additional financial stress?
While stay-at-home parents may not bring in income, they do provide a lot of support in the household. In fact, Salary.com found that if stay-at-home parents earned a salary, they would be making $162,581 a year! That’s a $5,000 increase from their 2017 calculation. So while there isn’t a paycheck in the mail for all of the hard work that stay-at-home parents put in, there is substantial value in the work that you. Take that into consideration when determining just how much life insurance you need.
But even if you’re unattached, you’re not getting off scot-free. It’s easy to think that if you’re single, no one depends on you. But that’s not exactly true. The millennial generation, moving into their early- and mid-30s now, are stepping up to take care of aging family members.
A study by AARP found that 25% of all family caregivers in the U.S. are millennials. They provide critical support to parents or other relatives who have serious health conditions, spending on average 20 hours per week doing unpaid caretaking duties. What would they do without you?
While it may be scary to think about all of these scenarios, you can take steps today to provide financial support if the d-word happens while you have people depending on you for support.
2. You Have Debt
The other d-word, debt, is also a motivator for many 30-year-olds looking for term life coverage (and should probably be a motivator for many more). Though some millennials are high earners, many are still faced with debt caused by:
- Auto loan
- Personal loan
- Credit cards
- Student loans
Mortgage and cars are often at the forefront of these financial decisions, but it’s worth considering how other unsecured debt may be affected if you were to pass away.
In most cases, your estate will not be responsible for any debt in your name. However, don’t forget about co-borrowers or co-signers; they could be on the hook for your debt… especially when it comes to student loans.
While some student loan issuers discharge the remaining balance after the borrower has died, private loans typically do not. So, if a parent or other relative cosigned your six-figure student loan for law school, they could be responsible for the remaining balance.
3. You Own a Business
Getting a small business loan? Your bank may require a life insurance policy.
The Small Business Administration (SBA) is not a lender. They work with banks and other lenders to provide government-backed small business loans to small business owners. This helps reduce risk for banks issuing out the loans and helps more people kick off their business venture.
The problem is, the risk is still there, just not entirely with the bank anymore. The government holds that risk. Not good considering that 20 percent of small businesses fail in their first year (and the stats get worse over time).
So, in return for funding your business, you may be asked to purchase a life insurance policy with a collateral assignment, making the lender the primary beneficiary on that policy.
There are other considerations when it comes to getting life insurance for business loans, so talk to a licensed agent to make sure you’re getting the right product.
Why is Term Life Insurance in Your 30s So Affordable?
There are several factors that determine how much you’ll pay for a life insurance policy, but a major one that pays in your favor is your age.
In your 30s, you’re likely in great health and have a longer life expectancy. Therefore, you’re considered lower risk than someone in their 40s or 50s. Take a look at the table below.
Term Life Insurance Quotes by Age*
*Quotes are monthly and are based on a Preferred health rating class for $500,000 in 20-year term life coverage without a medical exam.
As you can see, the older you are when you buy a term life policy, the more you’ll pay. But there are many variables, so it’s best to get a quote to get a better estimate of how much you might be paying.
Another big reason why term life is so inexpensive is it doesn’t build cash value. Instead of paying monthly premiums, investing them, and waiting for the value to accumulate over time, you simply pay a set monthly premium now, for a set amount of coverage, for a set period of time (available terms are 10, 15, 20, 25, 30, 35, or 40 years).
So, if you buy a $500,000 policy with a 20-year term for $20.31 per month, that is the same amount you’ll pay for those 20 years until the term expires. No, it doesn’t build cash value over those two decades, but that’s what makes it affordable. Cash value policies can be several times more expensive per month. And if you really want to get money back after the term ends, you can always look into getting a Return of Premium (ROP) policy.
Term Life Coverage in Your 30s is Smart
Being a 30-something means a whole lot of responsibilities and probably a lot of debt, too. But taking a moment to take on this must-do now can save you a lot of money for decades to come.