There are many things in life that we can plan. We can plan our career moves and financial goals. We can make step-by-step plans on how we will build a successful life for ourselves and our family. However, even if you're extremely healthy, financially successful, and have had a plan for everything thus far, there is no way to know exactly when and how you will pass away.
For our own peace of mind, we can make plans to make sure that this event doesn't financially affect our loved ones. Life insurance is a method of sound personal financial planning to protect what you've worked towards so far, especially since purchasing at certain times allows you to take advantage of lower insurance rates. But before we discuss the right time to buy, we have to sort out the different types of policies that are available to you.
Types of Life Insurance
The first type of policy is a Term Life Insurance policy. These policies only offer coverage for a set period, such as 10 or 15 years. They may be suitable for older individuals or for younger individuals who are not yet comfortable with a more long-term plan.
Term life policies may feature a convertible provision so that you can convert it into the second type of policy— a Permanent Life Insurance policy. This type of policy offers two subtypes: Whole life insurance and Universal Life Insurance.
Read more: Insurance as an Investment? It's Called Permanent Insurance
Whole Life Insurance
Whole life insurance is a type of permanent policy that features an investment component. With this type of insurance, you can build up the cash value of your policy without paying any taxes whatsoever. However, there are commissions, surrender charges, and built-in fees that may take away from a portion of your investment. Moreover, premiums are higher than those of term insurance, so it's best to be cautious and make sure it can fit your budget.
Universal Life Insurance
Universal life insurance is another permanent policy, which features saving elements but also has added flexibility in dictating the terms. For example, you can adjust your death benefits, premiums, and cash values as your financial situation evolves over time.
Whether you choose a term or permanent policy depends on your specific financial and family situation. For example, if your child has a disability that will likely make them financially dependent on you for their entire life, purchasing a permanent policy in the first place may be a better option.
How is it Priced?
To determine the premium of life insurance policies, insurance providers use a scoring system that predicts the likelihood of the policy's beneficiaries to make a claim. The factors of this score include gender, occupation, medical history, and personal habits such as smoking or substance abuse.
Read more: What Influences Life Insurance Premiums?
In Your 20s and 30s
Many young adults don't give a lot of thought to life insurance. We're young! We have our whole lives ahead of us, right? Well, the fact of the matter is, we don't know that for sure. It's important that to make sure that what you build now will be protected for years to come.
Read more: The 10 Biggest Insurance Mistakes You Can Make in Your 20s
In our 20s and 30s, we experience a lot of change in our life that affects our financial stability such as purchasing our first homes, first financed cars, and having children. We make a lot of big moves that may impact your family in the future. This stage in life is one of the best times to buy life insurance. Insurance premiums are low when you are younger because, presumably, it will be less likely that your beneficiaries will cash out on your policy.
Read more: Having a Baby? Here's How Your Insurance Needs Will Change
At this stage, you may consider a Permanent Life Insurance policy if you have a steady financial future or a Fixed Term Life Insurance policy if you prefer a shorter-term commitment. You'll have the option to purchase a 30-year policy, which will come at a good price compared to shorter-term policies.
In Your 40s and 50s
At this stage in life, many people feel more financially secure and are well established. They may have their sights set on retirement and are tipping the scale towards paying off their mortgage. But what if something were to happen to you before that happens? Would your family be able to finish paying your debts, death expenses, and ensure your partner has a nice retirement? Life insurance is a method of financial planning that can take care of these expenses for your family.
Read More: Top Reasons to Forgo Mortgage Protection Life Insurance
This is a great time to purchase life insurance if you haven't already. Insurance premiums may be a bit more expensive than in your 20s and 30s, but you still have access to long-term life insurance policies such as the 30-year option. Once you reach 59 years of age, you will no longer be able to purchase it and will have to take out a policy for terms of 10, 15, 20, or 25 years.
Read more: Retirement: Here's How Your Insurance Needs Will Change
When You're 60+
You've made it to the golden years! You've built up an empire (big or small) for yourself to make sure you and your family can rest easy knowing their future is secure. At this stage, life may slow down, and you may have to make adjustments to your insurance policies—including life insurance.
Read More: Important Insurance Coverage for Seniors
Your coverage options just grow slimmer as you age—20-year policies will no longer be available to you once you reach age 75. However, that doesn't mean you're out of luck! Shorter fixed term life insurance policies at 10 or 15 years will be your best option here.
So, What is the Right Age?
After going through the life stages, do you see the trend?
There is no "right age" to purchase life insurance. The best age to purchase a life insurance policy is the age you are right now. Yes, purchasing a policy in your 30s will have low premiums, but you can shop for a life insurance policy at any time to make sure your family is protected. There are many options out there depending on your age, financial security, and your lifestyle. To find out which policy is right for you, shop around and speak to an insurance professional.
Need help getting started? Get a life insurance quote here!
How Well Do You Know Your Life Insurance?
The more you know about life insurance, the better prepared you are to find the best coverage for you.
Whether you're just starting to look into life insurance coverage, or you've carried a policy for years, there's always something to learn.
Take our life insurance quiz and find out what you didn't know you didn't know about life insurance!