WHY YOUNGER IS BETTER
When it comes to timing, the younger you are when you buy life insurance, the better. This is because, at a younger age, you’ll qualify for lower premiums. And as you get older, you could develop health problems that make insurance more expensive or even disqualify you from purchasing a plan.
However, younger people faced with mortgages, car payments, and student loan debt tends to put off buying life insurance. While paying off current debt is critical, missing out on buying life insurance at a young age has a significant economic impact, much like delaying saving for retirement. The sooner it is purchased, the better.
WHEN TO BUY PERMANENT LIFE INSURANCE
With a permanent life insurance plan, the cash value grows tax-deferred. Premium contributions to whole life policies purchased at an early age can accumulate considerable value over the long-term time, as the cost of insurance is fixed for the entire term of the policy. The cash value can even be used as a down payment for a first home purchase. If held long enough, what you accumulate may be able to supplement retirement income. However, the money needs time to grow, which is why an early start is best.
COST OF WAITING
Forgoing life insurance purchases at a young age can be costly. The average cost of a 20-year level term policy with a $250,000 face amount is about $730.25 per year for a healthy 30-year-old male. In contrast, the annual premium for a 40-year-old male is about $1,333.50. The overall cost of delaying the purchase for 10 years is $6,032.50 over the life of the policy.
Additionally, waiting to purchase life insurance can have a greater impact on an attempt to purchase a policy. Medical conditions are more likely to develop as an individual grows older. If a serious medical condition arises, a policy can be rated by the life underwriter, which could lead to higher premium payments or the possibility that the application for coverage can be declined outright.
KEY TAKEAWAYS
- If others depend on you financially—or you have debt—it’s crucial to have life insurance.
- The sooner you purchase life insurance, the better, as it becomes more expensive with each passing year.
- Permanent life insurance has a cash value component. Holding the policy for longer lets that cash value grows over time.