What is the best age to buy life insurance?

The best time to purchase life insurance, which offers a safety net for your loved ones, is today. Here's why.

If someone may suffer financial hardship if you pass away, you should consider buying life insurance.

Life insurance companies charge the lowest premiums to applicants who are young and healthy.

Unfortunately, we're not getting any younger. As a result, every year you delay purchasing coverage, the cost of buying insurance goes up by 8-10%.

Why buying life insurance when you are young is a good idea

Life insurance companies charge the lowest monthly rates for candidates who are young and healthy.

If you are in your 20s to early 40s and believe you need life insurance, don't delay getting coverage. Every year you wait, your life insurance premiums go up.

Furthermore, if you develop a significant health issue later in life, life insurance may become excessively expensive or perhaps out of reach.

As the following table shows, the cost of life insurance for young and healthy applicants is often similar to the cost of a large pizza. 

Monthly 20-year term premiums for healthy non-smokers for $250,000 in coverage:

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Is getting life insurance in your 20s or 30s too early?

The question isn't whether you're too young for life insurance; it's whether you have someone in your life who will suffer financially if you pass away.

If you have debts that will be passed on to someone else, such as student or home loans, or if you are responsible for the financial well-being of another person, such as an elderly parent, you may want to consider life insurance.

Reasons you may need life insurance

When you pass away, your debts do not vanish. If your parents co-signed any student loans, they will be liable for your debt if you die.

Similarly, if you married young and have a mortgage on your home, your spouse may lose the home after your death if there is insufficient money to pay off the mortgage. Life insurance may assist your loved ones in covering such expenses after you're gone.

If you are caring for an elderly parent or a close family member, life insurance can help your loved one live comfortably long after you are gone.

It can also make sense if you are currently single with no debts, but expect to marry or have shared debts shortly. This is because the cost of life insurance rises by about 10% every year you get older. When you are young and healthy, you can lock in inexpensive rates for decades, if not your entire life.

As surprising as it may seem, life insurance has nothing to do with age. What matters is the financial impact your untimely death will have on people close to you.

If someone will suffer financially when you pass away, you are a good candidate for life insurance (check out our calculator today). 

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Should you purchase term life insurance or permanent life insurance?

Life insurance is of two types: term life insurance and permanent life insurance.

‍Term life insurance lasts for a limited period and does not accumulate cash value. The policy term can be as short as one year or as long as 35 years. Your beneficiaries will receive the death benefit only if you pass away during the policy term. Term life insurance plans are generally 10 to 15 times more affordable than permanent life insurance. 

Permanent life insurance, on the other hand, provides coverage for your entire lifetime. These policies also accumulate cash value, which you can access while you are still alive. Your beneficiaries receive the death benefit, not the cash value, upon your death. 

So, should you buy term life or permanent life insurance?

It all depends on your financial needs and budget.

If your budget for life insurance is rather limited, term life insurance can help you buy more coverage for less. Later, when you can afford to spend more on life insurance, you can convert your term life insurance policy into a permanent life plan, depending on the terms of your contract. Or, you can drop the existing term plan and purchase a new permanent life insurance policy. 

Term life insurance, generally speaking, is more suitable for financial needs that have an end date. If your primary reason for buying life insurance is to help your loved ones pay off your debt and/or secure their future until you achieve financial independence, term life insurance is likely a better option. You can match the term of your policy to your longest financial obligation and secure adequate protection for life’s “what-ifs”. 

Permanent life insurance, in contrast, may suit you better if you have a lifelong dependent or want an additional investment vehicle. These policies pay out regardless of the time of death and grow cash value at a fixed rate, which you can use in a financial emergency or to fund retirement. 

Should you buy life insurance if you are young and single?

If you are young and single with no dependents, but have debts that will continue after you die, you should consider a term life insurance policy.

After your death, your family can be able to pay off your debts thanks to the death benefit. Purchasing life insurance now, while you are eligible for low rates, is also a good option if you expect to marry or live with your partner in the near future.

However, if you are young and single without any debts or dependents, you can safely go without life insurance.  

Conclusion

Life insurance can provide you with peace of mind by ensuring that your loved ones are protected in case of your death.

Knowing when to purchase life insurance is important for protecting your family's financial future. The timing depends not on your age, but your specific needs and financial plan.

The earlier you obtain a policy, the better, because premium prices rise with age. A Dundas Life licensed expert can assist you in assessing your life insurance needs and securing a life insurance plan that is tailored to your specific needs.

Frequently Asked Questions

Do I need life insurance before I turn 30? 

If you have debts that others will inherit, you should consider getting life insurance before age 30.

Buying life insurance when you are young and healthy may also be a smart move if you plan to get married (or live with a partner) in the near future. Life insurance is cheaper when you are in your 20s and 30s.

And the best part? Your premiums remain the same throughout the duration of your policy. Buying life insurance when you are young can help lower the total amount you will spend on it over the course of your lifetime. That said, if you don't have any debts or dependents, you likely do not need life insurance today. 

How long does life insurance last? 

A term life insurance plan lasts for a specific number of years, like 10, 20, or 30 years.

Most term plans are guaranteed renewable, meaning you can renew them without submitting proof of good health. Keep in mind that your premiums will increase at each renewal period (e.g. after 10 years). Whole life insurance, on the other hand, lasts for your entire lifetime. 

When are you too old for life insurance? 

The maximum age at issue varies among providers, but many set their maximum age at issue to 75 or 80.

If you are under this age limit, you should be able to purchase both term life insurance and permanent life insurance. If poor health makes it impossible to buy a medically-underwritten policy, your only option would be a final expense insurance plan, which lets you forego the medical examination.

The downside is that these policies have limited death benefits, usually just enough to cover end-of-life expenses and leave a small inheritance to your children or grandchildren.

Generally, very few insurers offer life insurance past age 85, but there may be exceptions. 

Should I get life insurance for my child? 

The main purpose of life insurance is to replace a breadwinner's income. Even though you are most likely not financially dependent on your child, buying life insurance for her can make sense in a couple of scenarios: 

• You want to protect your child’s future insurability if she later develops a serious illness. 
• You want to provide living benefits (in the form of cash value) that she can use for many things as she gets older, like college fees, collateral for loans, or paying for a wedding.