If you are looking into purchasing a life insurance policy, one of the biggest questions that comes to mind is when. You don’t want to wait too long, but you also don’t want to be paying into something that won’t be worth the investment at your stage of life, right? However, life insurance can be a great investment tool as well; you can create a safety net for your loved ones after you pass, but also for yourself before. There are a few different things to look at when talking about the timing of these policies.
Younger = Better
The easy answer to the initial question is: the younger you are, the better the time is to invest in a life insurance policy. This comes down to the financial aspects in two ways: premiums and money growth. The younger and healthier you are, the lower your monthly premiums will be. As for the investment side, plans that are interest-free (or even if they aren’t) will grow exponentially the longer they are set up and accruing money.
Different Types of Life Insurance?
There are different benefits to starting the types of life insurance early.
Term life insurance policies only cover a set amount of years, so ensuring coverage for the years you anticipate having dependents or financial obligations is the most important. Whether this is a partner, children, or even debt of some kind, making sure those commitments can be fulfilled is the main goal of a life insurance policy. Since it is a set number of years, it can be less expensive or a smarter commitment to choose a long-term policy over a permanent one.
Permanent life insurance policies are not confined to an amount of years, and they can also be a more useful investment tool compared to term policies. The cash value grows tax-deferred; the longer the policy exists, the more money will accumulate in it. It can also be used as a resource for payments before death if needed (college fund, down payments, retirement income, etc.). Additionally, there is a fixed premium cost for the entirety of your policy.
Circumstances to Consider
While there are very few reasons why investing in a life insurance policy would be a bad idea, there are lots of scenarios that can be a great motivator for a new policy.
Relationship status
If you are married or have financial ties with a partner (a mortgage, car payment, loans, etc.), having life insurance policies for the both of you can secure you or your partner the ability to pay off those expenses if you pass. Even if you are single, debt like credit card payments or student loans can fall on loved ones if you are no longer able to finish paying them off, so life insurance can remove that stressor.
Children
Kids are often the #1 reason that people choose to get life insurance. Costs after an untimely death could be detrimental to the remaining caregiver/s. When choosing a policy, your death benefit should be enough to cover all existing debt, a potential college fund, and replacement income for the amount of years they are dependent on you.
You can also purchase life insurance for your child. Buying a policy for them can be cheaper than waiting until they are an adult, especially if you choose permanent life insurance. The policy you purchase can be paid in a lump sum or monthly, and when they turn 18 can be transferred to their name or cashed out.
Health conditions
Having pre-existing health concerns when trying to get life insurance can skyrocket your costs, or even disqualify you from coverage as a whole. Purchasing a policy while you are young usually means you are healthier and more likely to get a better rate. There is no way to know when your health or situation could change, so waiting can cause you to lose opportunities without having any control over it.
Need Help Deciding Whether Life Insurance Is For You?
There are lots of factors to consider when looking at life insurance policies: length, amount of coverage, investment benefits, premiums, and more. Let an agent consult you in the decision-making process of figuring out your priorities and what policies best align with them. Call us at (540) 404-3098 today to get more information!