In this edition of our Family Financial Planning series: Choosing the Best Time to Purchase Life Insurance
For most American families, retirement strategy is something of a moving target. Between the volatility of the stock market and the uncertainty around the future Social Security, estimating your retirement income would be a lot easier with a crystal ball.
Fortunately, some financial planning decisions are easier to arrive at than others. Buying life insurance happens to be one of them.
The best time to buy life insurance might be different for everybody. But choosing the best time for you and your family is a simple process. This guide will explain how.
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The Best Time to Buy Insurance – Key Takeaways
- If there is someone in your life that is depending on your income to get by, then having some form of life insurance is essential.
- Life insurance premiums get more expensive as you get older
- Your family’s life insurance needs might change over time or with sudden events. You should review your life insurance needs every year, the same time you review your health insurance.
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Main Topic: At What Age Should I Buy Life Insurance?
Deciding whether or not to buy life insurance comes down to two simple questions: Who is depending on you financially, and how much would they need if something happens to you?
Life insurance payouts can be critical to keeping your loved ones protected in worst case scenarios. A well-strategized policy can take care of their rent, bills, and everyday expenses, while also making sure that you’re not leaving them with any debt.
Generally speaking, life insurance gets more expensive the older you get. With this in mind, many experts recommend buying while you’re still young, so you can lock in a good premium. While there is logic to buying young, it’s also important to not waste your money on coverage if you don’t need it.
Milestone Moments for Buying Life Insurance
Some events in your family’s life can signal that it’s a good time to buy life insurance. These include:
- Getting Married. Even if your spouse can rely on their own income, it’s important to consider things like your debt and student loans. If something happens to you, it could be a burden too big for your spouse to handle.
- Having Children. From groceries and food to clothes and education, raising kids costs a lot of money. Who would pay for all that if something happened to you?
- Purchasing a House. Monthly mortgage payments can be difficult to pay on a single income. Life insurance means your family wouldn’t have to worry about losing the house
Buying Life Insurance in Your 20s
Buying life insurance early in life can get you the best rates and the most options. Even if you’re just starting out, a life insurance plan can keep your growing family protected.
On the other hand, you might not need life insurance this early in life. It all comes down to who is relying on your income to get by.
For many in their 20s and 30s, it’s a better idea to start a Health Savings Account and other high-yield investment accounts.
Buying Life Insurance in Your 30s
Your 30s is when many families decide to first purchase life insurance. This is when many big milestones are reached, like having kids or buying a house. Events like these are what could make life insurance a necessity, where it was not needed before.
Buying Life Insurance in Your 40s
Many families are choosing to have children a bit later in life. In addition, many parents are still supporting their children financially as they go through college and start a career.
Buying Life Insurance in Your 50s and 60s
After 50 years old, it’s possible that your children are no longer dependent on your income, you’ve sold the family house, or other events that might make your coverage needs changed. As you head towards 65 and the age to enroll in Medicare and Social Security, it could be time to modify coverage to bring monthly premiums down.
This is also the age when you’re eligible to purchase final expense insurance. This covers end-of-life costs like funeral expenses and legacy debt.
Buying Life Insurance in Your 70s and Beyond
There are still many life insurance options for people who are 70 and above, but at this age, coverage may only be needed for end-of-life expenses. While your loved ones might be able to take care of themselves financially, you never want to leave them with the burden of funeral costs.
Best Time to Buy Life Insurance FAQ – Frequently Asked Questions
Q: When is the best time to buy life insurance?
A: The best time to buy life insurance is when you start providing for someone else financially. Whether it’s a new spouse or a new child, it’s your responsibility to protect them in the event that you’re no longer around to support them.
Similarly, buying a house or incurring any significant debt can signal the right time to buy a policy.
Q: Is it worth it to get life insurance at 30?
A: Many people purchase life insurance in their 30s, when premiums are relatively low and there are many options on the table. But good life insurance plans are still available in your 40s, 50s, and beyond, in case you don’t have financial dependents and want to invest the money elsewhere.
Q: What reasons will life insurance not pay?
A: Reasons that a life insurance policy won’t pay out include lying on the application, dying while committing a crime or unreasonably dangerous activity, suicide, fraud, and more. Check your policy for the specifics.
Q: What are the reasons not to buy life insurance?
A: If you aren’t supporting anyone financially, then you might not need a comprehensive life insurance plan. But it’s important to consider that in the event of your death, your debt, funeral costs, and other legacy expenses will fall upon the people you love the most. These are all things that can be covered at any age for a reasonable monthly price.
Q: How much life insurance coverage do I need?
A: Your specific needs will vary, and it’s best to talk to an expert before buying life insurance. But a well-known rule of thumb is to multiply your annual salary by the years you have until retirement. For example, a 40-year-old making $55,000 per year and planning on retiring at 65 will need $825,000 in coverage ($55,000 x 15 years).
Complete the HSA for America Six-Step Financial Protection Program
Life insurance is only one pillar of a strong retirement plan. No matter what stage of life you’re in, getting a head start on planning is the most effective way to build security and maximize your investments.
That’s why we walk all our clients through the Six-Step Financial Protection Program. Finding and enrolling in the best health plan is just the beginning. Our Personal Benefits Managers will guide you through assessing your disability risk, planning for retirement income, creating your living will, and more. All of this is 100% no-charge, just for being a part of the HSA for America family.
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