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When Should You Buy Life Insurance?

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Having the right insurance coverage is crucial to provide financial protection for policyholders and their loved ones. But many people wonder exactly when to get life insurance. This guide will provide insight into the best time to purchase life insurance coverage.

When should you consider buying life insurance?

If you're asking yourself "When should I get life insurance?" you've come to the right place to find out. Waiting to buy an insurance policy can have financial consequences for both the policyholder and their loved ones. While this is an individual decision to make, here are some common examples of when buying life insurance makes sense.

When young and healthy

What age should you get life insurance? For many people, the answer is to buy insurance when they're as young as possible. In fact, it often makes sense for people to buy life insurance in their early 20s upon starting their careers.

It's a common misconception that it's a good idea to buy life insurance only after someone is dependent on the policyholder for income or services. Even people without anyone depending on them may want to plan ahead and get covered. That's because buying life insurance early on can result in lower premiums. It also makes sense to buy a policy before pre-existing conditions develop that could make it hard to get covered later.

So, for those asking "When is life insurance necessary?" it's probably best not to wait. Coverage purchased early on tends to cost a few dollars a month. It can provide invaluable protection later, once loved ones come to depend on the policyholder's salary.

After getting married

Life milestones can also provide a simple answer to the question of when to get life insurance. Specifically, it may be a good idea to get a policy after getting married.

Most people who get married make joint financial decisions based on multiple incomes. Or, if one spouse isn't working, that spouse provides crucial services to the other spouse that might otherwise have to be paid for. Buying life insurance could ensure that the death of one spouse doesn't cause financial devastation to the other.

Marriage is also a good answer to the question of when to get life insurance because married couples often consider starting a family. If the couple has plans for children -- even far into the future -- it can make sense to get covered as soon as possible. That way, protection will already be in place once kids are born.

After having children

Those who don't buy life insurance early or upon marriage should reconsider when to get life insurance after having children. Raising and educating a child can be extremely expensive. Many parents wish to have life insurance coverage to ensure their child will be provided for even if something happens to them.

It makes sense for both parents to have life insurance in most cases. This is true even if one parent is a stay-at-home spouse. While the death of a stay-at-home parent wouldn't result in a loss of income, it would result in the loss of valuable services that might otherwise need to be paid for, like daycare and other childcare costs. Consider this when deciding when to get life insurance.

After purchasing a home

It may also be a good idea to purchase insurance after buying a home. A term life insurance policy could provide funds to repay a mortgage. Term life insurance policies are in effect for a set time, such as 20 or 30 years. They pay out a death benefit if the policyholder dies during the coverage term. This death benefit would help the policyholder to leave a paid-off home to surviving co-owners or other family members.

After starting a business with partners

Starting a business might be a surprising reason to get life insurance. When two or more partners start a business together, they must make decisions about what happens to the business after death.

Often, it makes sense for surviving partners to buy out the interest of the deceased person. That way, the family of the deceased can get paid and the surviving partners can continue to run the company without their interference. Buying a life insurance policy and making the partners the beneficiaries can provide the funds to make that happen.

RELATED: Is Life Insurance Worth It?

When to buy term life insurance

Does the answer to the question "When should you get life insurance?" change if buying term life insurance? In most cases, no. Here are some times when it's a good idea to buy a term life insurance policy:

  • When young
  • After marriage
  • After having children
  • After purchasing a home
  • After starting a business

Many of the best term life insurance companies have upper age limits on when someone can get covered. That's another reason to buy protection as soon as possible. While someone in their 60s may be able to buy term life insurance, doing so would often be very expensive.

It's also important to consider how long the coverage will be in effect. Term life policies only pay out if the policyholder dies during the coverage period. For example, a 30-year term life policy purchased at age 20 would last until age 50. Unless the policyholder died before 50, the policy wouldn't pay the death benefit.

So, while buying young to lock in affordable coverage makes sense, consumers deciding when to get life insurance must think about how long they expect to need a life insurance policy. Often, people want coverage to last until their kids are grown. Or they may want coverage to last until they would retire and their income would no longer be needed. Take the desired end date into account when deciding when to get life insurance.

When to buy permanent life insurance

Permanent life insurance remains in effect for life as long as policyholders pay premiums. It's much more expensive than term life insurance. So while buying a policy at a young age can help save on premiums, it can also mean years of paying for expensive coverage that isn't yet necessary.

It's best to buy permanent life insurance only once a policyholder decides it's needed for lifetime protection -- for example, if someone has a disabled child who will always need care.

For those who won't need permanent coverage, term life insurance can be a better bet.

The cost of waiting to buy life insurance

For those considering the question of when to get life insurance, think about the downsides of waiting. There are many reasons why it doesn't make sense to delay purchasing a policy.

More expensive premiums

The best life insurance companies offer affordable monthly premiums. That's especially true when buying a policy at a young age because waiting can cause costs to go up. Consumers who want to lock in protection at the lowest rate shouldn't delay in getting covered. Consider this when deciding when to get life insurance.

Increased chance of being denied a policy

Consumers deciding when to get life insurance should also consider the risks of getting sick. Certain health conditions can make it expensive or even impossible to buy term life insurance. It's best to buy coverage before developing serious medical problems.

If a person waits and then gets very sick, it may no longer be possible to get the crucial protection life insurance offers. This risk needs to be taken into account when deciding when to get life insurance.

Leaving loved ones unprotected

Anyone who has people depending on their income or services is taking a huge risk if they don't have life insurance. When deciding when to get life insurance, consider what could happen without coverage.

If a person dies and their loved ones must sell a home or their kids can't afford college, that's a tragic outcome. It could have been avoided with the right insurance coverage. Those wondering "When should you get life insurance?" will want to make sure their families are protected.

How to buy life insurance

The question "When should you get life insurance?" is an important one. But it's also essential to know how to buy life insurance.

Here's how to buy coverage:

  • Determine how much coverage to buy. Think about the income that will need to be replaced and other costs loved ones could incur upon a death.
  • Shop around for insurance. Get quotes from three to five insurance providers or more. Prices and terms vary from one policy to another.
  • Submit an application. Applicants must detail their health history. Many, but not all, life insurers require a medical exam. It's important to be honest when applying.
  • Read the fine print. Make sure the coverage provides a desired death benefit and learn about policy exclusions or limitations.

Once approved, the policy will go into effect and loved ones should be protected. This can take some time, so plan for that when deciding when to get life insurance.

FAQs

  • Yes, for many people, it pays to buy coverage in their 20s. This is true even if they don't have dependents yet. Buying life insurance early on often reduces monthly premium costs. It also reduces the chances of getting sick before having coverage.

  • It depends on their family and financial situation. There are a number of approaches to decide how much coverage to buy. Multiplying income by 10 is a simple approach. A 25-year-old could also use the DIME method to estimate the necessary coverage amount. To do this, calculate:

    • The amount of debt that would be left behind
    • The amount of income the family would need to replace
    • How many years they'd rely on that income
    • The outstanding mortgage balance, if applicable
    • The cost of providing surviving children with higher education
  • It depends. The cost of life insurance varies by age, health status, insurance company, and amount of death benefit. Term life insurance is much cheaper than whole life. Term insurance can often be purchased for a few dollars per month for those who are young and healthy. Life insurance is also less expensive if purchased when young. This is something to consider when deciding when to buy life insurance.

  • It depends on the policyholder's family situation. Coverage should be in effect for as long as anyone is dependent on the policyholder's income or services. Often, it's a good idea to make sure the term lasts until retirement or until children graduate from college.

  • Maximum age varies by life insurance company, although it's often possible for people in their 60s or 70s to buy term life insurance. However, premiums will be much more expensive. There are even some policies that don't have a maximum age. These are often "guaranteed issue" policies that don't require a health checkup but have very low limits for death benefits.

    It's best for consumers not to wait until the maximum age if they're deciding when to get life insurance. Purchasing at a younger age can make it easier to find affordable coverage.

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