Purchasing a life insurance policy has long-lasting consequences for your loved ones, and a lot of factors go into the decision.
A key factor that should play into your decision is your age, as it affects the cost of your life insurance and determines what features will benefit you most.
Whether you’re in your 20s or your 60s, read on to see what you need to know about purchasing life insurance at every age.
You may be surprised at just how affordable life insurance can be.
Life Insurance in Your 20s
20-somethings, you may be surprised to see yourself on this list.
But it’s never too early to buy life insurance, especially if it will benefit the people in your life.
Why to buy life insurance early
- You have a family. If you started a family early and want to ensure that your children can attend college or your spouse isn’t left struggling without your income, you should purchase life insurance.
- You have a substantial amount of debt. If college, a mortgage, health issues, or other unexpected events have left you with significant debt, you may want to consider life insurance now. Not all loans, especially private ones, are forgiven in the event of your passing, and you don’t want to burden your family.
- Insurance rates increase with age. The longer you wait, the higher your monthly costs. If you purchase life insurance now, you end up paying far less on a sizeable policy than someone in say, their 50s.
What life insurance to buy
So what policy should you choose?
The average 20 to 30-year-old will benefit most from a term life insurance policy as it has lower rates and sufficient coverage.
Your main concern is most likely keeping your family from being bombarded with expenses in the case of your passing, and a term life plan should cover the costs you leave behind in your 20s effectively.
In your 20s, you may have far less debt and a smaller number of people depending on you than someone in their 30s or 40s, so you probably don’t need to purchase as large of a policy either.
Total your college debt, income, and expenses to determine how much insurance to purchase.
Life Insurance in Your 30s
Once you hit your 30s, purchasing life insurance becomes even more critical. As your family, debt, and expenses will likely increase, so should your insurance policy.
Here are a few of the most important factors to take into consideration:
- Your company’s life insurance policy might not transfer if you do. A lot of these policies are group policies, meaning if you leave your employer, you can kiss your insurance goodbye.
- Rates are climbing more steadily. Every year you wait to purchase life insurance, premiums increase.
- Health impacts cost. If you’re a smoker, go ahead and double your insurance rate. If that doesn’t sound appealing, consider quitting. While you’re at it, go ahead and get fit, then provide a medical exam to your insurer. It lowers rates significantly.
- Weigh your income. Financial expert Jeff Rose suggests you 30-somethings take out 10x your annual income as the bare minimum for your life insurance policy to secure your family’s well being.
- Don’t assume life insurance is out of your reach. In the article referenced above, Rose quotes an insurance premium for a healthy 30-year-old woman with a 30 year, $250,000 plan at around $15 a month. And without a medical exam, it would be just over $20.
- Purchase a term plan if, again, your main priority is protecting your family from being financially overwhelmed in the event of your passing. It’s affordable and well worth the money.
Life Insurance in Your 40s
If you’ve reached 40 and have yet to purchase life insurance, don’t fret. It’s certainly not too late to begin paying into a manageable plan.
Here’s what you need to keep in mind if you’re purchasing life insurance in your 40s.
- Your earlier policy might not be enough for where you are. While that $250,000 plan you purchased as a 25-year-old may have been sufficient then, chances are you need more now. Reassess your finances.
- Policies are affordable, especially if you’re healthy. Even in your 40s, you can get a reasonable rate. It might be double what you would have paid in your 20s, but still worthwhile. And a clean bill of health always lowers premiums.
- You should closely consider the term, not just the amount of your policy. As your age climbs, you should assess your term length critically. Do you still have a mortgage? How close are you to retirement? How old are your kids (and how many college educations do you still have to pay for)? On the opposite end of the spectrum, if money comes your way or you pay off your debts, you might be able to shorten your term, too.
- You should still consider a term life plan as your best option for protecting your family and lightening their load.
Life Insurance in Your 50s
If you’ve yet to purchase a life insurance policy and you’re 50 or older, you need to be prepared to pay more than a 20 or 30-year-old would.
But you can still get a policy that won’t break the bank.
Here’s what you need to consider:
- Assess your debt and your family’s needs. If your passing would leave your family significantly burdened, it’s still smart to purchase life insurance in your 50s. Otherwise, it could be wiser to forego purchasing a plan.
- Health plays a bigger part in your 50s. The older you get, the more your health level impacts premiums. So if you have a medical condition or you smoke, you need to do your research to find the right plan for you.
- Consider your term carefully. There are two sides to this coin. In your 50s, you may want to get a longer term to ensure you’re covered for life, as getting newer terms gets even more difficult in your 60s. On the other hand, if you have limited expenses and needs, you may want to purchase a short term to get you through to retirement age.
- Consider alternatives to term life insurance. Your 50s are a great time to shop for other types of life insurance, namely final expense insurance or burial insurance. Both of these types of insurance are affordable and cover your end-of-life expenses. With final expense insurance, you won’t see more than around $5,000-$50,000, but if that’s all you need, it’s a viable option. You might also consider whole life insurance if you’re looking for a guarantee, but you’ll pay far more for it than the other plans mentioned here.
Life Insurance in Your 60s and Beyond
If you’ve reached your 60s or older and are contemplating life insurance, here’s what you need to consider:
- Assess your needs. If you have sizeable medical bills or other debt, your spouse hasn’t reached retirement and relies on your income, you want to provide some financial security for your kids, or you want to fund your retirement from your cash value (whole life), you might still want to consider life insurance. But if your debts are minimal and you and your husband or wife are nearing or in retirement, you might put your money to better use elsewhere. If anything, you might just need final expense or burial insurance.
- Look at your health. If you’re 60 or older and have acquired some health issues over the years, you may have a hard time finding a term life plan. You may want to consider a guaranteed issue policy, but know that it will cost hundreds of dollars a month, and your loved ones may not receive the death benefit if you pass away within a couple years of purchasing the policy.
- Still consider term life insurance. If you are in good health and can manage the premiums, a 10-year term could be beneficial. If you’re still working, look at your income and the gap it would leave behind for your spouse, then supplement it with the policy.
- Consider dropping your policy or picking up another term. If you come to a point of financial freedom and realize you no longer need your term life insurance, you can stop paying premiums. With a whole life policy, depending on how long you’ve held it, you should be able to leave and receive a check with a substantial cash value. On the other hand, if you already have a term policy and feel the need to maintain it, you can still get another 10-15 year term if you meet the requirements.