What age should you get life insurance? It’s a popular question. And with nearly half of Americans lacking it, it’s one that many people are struggling with. We’ll explore the importance of life insurance, why you should prioritize getting it if you’re young, and how to get it now no matter what age you are.
What to Know About Life Insurance
What age should you get life insurance? The younger, the better. The two most crucial components contributing to a life insurance policy are the applicant’s age and health. These two factors affect both the eligibility and premium range. The younger and healthier a person is, the cheaper the premiums will be.
Health is perhaps the priority concern for people uncertain of the duration they need. Renewing an old policy or buying a new policy after a decade or so is considerably more expensive, so choosing the right plan upfront is usually in your best interest.
With a few of the need-to-knows about life insurance covered, let’s break down life insurance by age.
Life Insurance In Your 20s
Planning in advance is one of the most important steps for any effective insurance plan. The earlier you can prioritize dedicating some money towards a life insurance plan, the better. And as is the case with any insurance plan, a one-size-fits-all approach isn’t the best — as every individual’s circumstances are unique.
Harkening back to our comment about why young people need life insurance, the 20s is a good age to start. While it’s certainly not the type of insurance people in their 20s are typically thinking about — after all, you’re young, healthy, and not truthfully thinking that far into the future —life circumstances can change overnight, and it’s always good to be prepared.
One of the reasons to get life insurance young is because it’s inexpensive. Typically, rates for people in their 20s with good overall health range from about $20-$25 a month for a 20-year insurance policy. The biggest question to consider here is what type of life insurance you want: term, permanent, or universal.
Term Life Insurance
Term life insurance — sometimes known as pure life insurance — guarantees a stated death benefit to the policyholder’s beneficiaries if the insured person passes during a specific term. Term life premiums are calculated based on a person’s age, health, and life expectancy. You can purchase term life policies that last 10, 15, or 20 years.
Often, you can convert a term policy into a life policy as you get older and can afford higher premiums. And since term life insurance rates are locked in while the insurer is in their 20s, this is a good choice for many people just starting out with life insurance.
Permanent Life Insurance
This type of life insurance remains valid so long as the premiums are paid. Whereas term life insurance denotes a term of 10-20 years, permanent is just that — permanent. This type of life insurance can also come with a cash value, which means it can also act as a sort of savings account in the long run.
Universal Life Insurance
Universal life insurance can also be coupled with a cash value. Like permanent life insurance, purchasing this type of plan in your 20s will allow you to accumulate considerable sums of money in the future.
Unlike permanent life insurance, universal life insurance doesn’t have fixed premiums, which means you have more flexibility when you make payments. However, if you fail to adequately fund the policy, it could end.
We do an in-depth dive into the pros, cons, and differences of types of life insurance in our blog, The Difference Between Term and Supplemental Life Insurance.
Life Insurance In Your 30s
Once people have had time to build more of a financial foundation in their 20s, the 30s is usually when people start thinking about life insurance a bit more.
In addition to increased financial stability, many people are also married with children (or soon to be expecting), and suddenly the realization that they’ll need more money in the years to come is something they’re giving more thought to.
If you didn’t buy a life insurance policy in your 20s, the 30s is a great time to do so. In fact, it could be the optimal time for some, as the possibility of increased financial flexibility means you don’t have to make decisions solely based on the least expensive option. If you did purchase a small policy in your 20s, you may even wish to upgrade now that you have more money.
Most employers offer some kind of life insurance policy. However, if you change jobs — in many cases — you can’t take the policy with you. Generally, it’s not the best idea to solely rely on the life insurance provided by your employer.
On average, these types of policies are paid out according to one to two times your annual salary. Unfortunately, this is not sufficient to guard you and your family against unforeseen events.
We recommend obtaining a policy amounting to somewhere between 10-12 times your annual income.
Life Insurance In Your 40s
In your 40s and asking yourself “what age should I get life insurance?” Definitely now. Policy premiums will begin to rise dramatically around this age, so you’ll want to do your best to adjust your plans depending on what you already have (or don’t have).
Policy rates in your 40s are going to be higher than in your 20s. With this in mind, lower-level coverage policies are a better choice for many people.
Life Insurance In Your 50s (and Beyond)
Waiting to buy life insurance until your 50s isn’t the cheapest venture. But if you don’t have one at this age — don’t worry. Generally speaking, a whole life insurance policy is usually the best choice for people over 50.
A whole life insurance premium will typically stay the same throughout the life of the policy, you can still accumulate some cash value which can be used later in life.
Life Insurance FAQs
Still have a few questions? Check out our life insurance FAQs below. Not finding your question below? Reach out to our team and we’ll be happy to help you.
What Is the Cost of Putting Off Life Insurance?
Still not sold on purchasing life insurance as early as possible? Not doing so can actually prove to be quite costly. For instance, the cost of a 20-year level term policy with a $250,000 face amount is approximately $200 for a healthy 30-year-old.
In contrast, the annual premium for an otherwise healthy 40-year-old is closer to $500. This amounts to an overall cost of about $3,000 over the life of the policy, just by delaying the policy for 10 years.
Waiting to purchase a life insurance policy can also affect your ability to purchase a policy. As you get older, the chances of coming into a policy with pre-existing medical conditions increase. If the conditions are serious, it’s possible your policy could be rated by the life underwriter. This could lead to higher premium payments or the possibility that the application for coverage could be declined outright.
Can You Still Purchase Life Insurance After 60?
Yes, you can. Even if you’ve waited until later in life, it’s never too late to purchase life insurance. However, premiums will be more expensive. Don’t allow a late decision to turn into a bad decision by choosing to never purchase life insurance.
How Soon Can I Borrow from My Life Insurance Policy?
You can borrow from the policy as soon as there is enough cash value built up to take a loan in whatever amount you need. You can only borrow against a permanent or whole life insurance policy since term life insurance does not accumulate any cash value.
Do I Need Life Insurance If I Have A 401k?
Yes, you do. A 401k is a retirement fund, whereas life insurance ensures your family is taken care of in the event of your death. A 401k is there to help you enjoy the golden years, so to speak. It does not protect you and your loved ones against the unexpected.
How Old Does A Life Insurance Beneficiary Have To Be?
Children under 18 can be named as primary or contingent beneficiaries. However, if the policyholder dies while the beneficiary is still a minor, the proceeds may be sent in their name to their legal guardian.
At What Age Does Life Insurance End?
There isn’t an age where your life insurance policy will end so long as you keep funding the account. However, a lot of companies won’t issue a policy to someone aged 85 or older.