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Life Insurance

How Getting Life Insurance When You’re Young and Healthy Can Save You Thousands

When you’re young and healthy, you might not think you need life insurance, but it could be the best time to buy. Locking in a low rate when you do not have a lot of risk factors can save you thousands of dollars. Read more to find out how.

Life Insurance When Young and Health

Buying life insurance when you’re young and healthy is a wise financial investment in your future. From reducing medical underwriting to staying up on inflation, purchasing a policy when you’re young offers you many benefits at a lower cost. Read on to learn how to get a policy that gives peace of mind to your loved ones while providing savings in the interim.

Why It’s Cheaper to Buy Life Insurance Sooner Rather Than Later

Insurers charge policyholders based on the likelihood they or their beneficiaries will need to make a claim. Younger, healthier people are less likely to die soon, which means it is less likely that insurers will need to need to pay out their policy’s death benefits in the near future. For this reason, younger policyholders generally have lower monthly premiums.

While savings on premiums is attractive in the short-term, there are also various long-term benefits. When you lock in a life insurance rate, you do not have to worry about that rate rising.

Additionally, getting life insurance when you’re young and healthy also eliminates the need for medical underwriting. Medical underwriting is a process where insurance experts review your health, including a medical exam, to determine your risk level. This step is often skipped for young applicants.

While getting a life insurance policy earlier in life does provide benefits, many of those in that position may have limited experience in evaluating and shopping for a policy. Read on to learn how to pick the best policy for you and your family while you’re still young and healthy.

Best Life Insurance Options for Young People

There are a few different life insurance options aimed at those under 35. As they do not offer the same benefits, it’s essential to understand what differentiates them and what may be appropriate for your situation.

The key is to lock in a reasonable rate for a policy that lasts until your death or as long as you need it. Consider those factors when looking at the following life insurance policy types to see which ones are best for you.

Term Policies

Term life policies are usually simple and affordable. They last for a predetermined number of years and then expire. If you die during the insurance term, your beneficiaries will receive a death benefit. If you outlive the length of the policy, the death benefit will not be paid. There are a variety of different term life insurance policies, but the one thing they have in common is that they’re designed to expire after a set term.

Term life can be an excellent option for young people who cannot afford another policy, sole financial providers with people who depend on their income, stay-at-home parents, and people with significant debt.

Convertible Term Policies

Convertible term life insurance starts as a term policy with a set end date but can be converted to permanent life insurance. Permanent life insurance has no end date and remains in effect until death.

This type of insurance is an excellent way for someone young to get the benefits of an inexpensive term policy when their earning power is low and then convert to permanent life later.

A significant benefit of convertible insurance is there’s no medical exam to convert your policy. If you add more coverage, there might be new medical underwriting.

Whole Life Policies

Whole life insurance is permanent insurance designed to cover you until death. The payout set at the beginning of the policy will be the amount your beneficiary receives at your death, no matter when that is.

Whole life tends to have higher premiums than term life because there’s a guaranteed payout. This variety is a great option for young people looking to get a great deal by locking in a rate early.

Unit Linked Insurance Plans (ULIPs)

Unit-linked insurance plans are designed to follow a typical lifetime trajectory, providing for evolving responsibilities as you have children, they go to college, and you begin caring for your parents. With a ULIP, your options will be customized to your future plans, combining a dual investment and insurance benefit.

This can be a good approach for younger people, but it does come with some risk because some of your money is being invested and is potentially subject to market volatility.

Endowments

An endowment also includes both insurance and savings. Part of your premiums go toward insurance payments, and part goes toward savings.

Endowments are a variety of term policies, and you receive the mature amount from the savings if you survive past the end of the term. If you die, your beneficiaries receive that amount and a potential bonus, if applicable, based on your specific policy.

Think of this policy as a guaranteed savings account. If you’re not good at saving and you have a family’s welfare to consider, this is an excellent option.

How to Determine Whether Life Insurance is Right for You

You might wonder if you need life insurance as a young person. Not everybody does, but it can give your beneficiaries peace of mind and security. The decision to buy life insurance depends on your circumstances:

Future Goals

Consider where you are today and what your goals are. Do you have or are you going to have a family? Will you be taking out loans for education? Are you planning on buying a home? Who will pay for these things for your loved ones if you die?

If you are not planning on getting married, having children, or buying a home, you might not need as much life insurance. If you want these things, life insurance can relieve the burden of these expenses from your beneficiaries.

Your Health

Consider your health before buying life insurance. If you’re healthy today but have health problems in your family history, getting life insurance while you’re still healthy is a great idea.

Also, consider add-ons or riders to your insurance. For example, if you have a dangerous job and are worried about a disability, you can get insurance to cover a disabling event. Similarly, some policies can be added to life insurance to help financially if you lose your job.

Dependents

Dependents are one of the most significant factors in selecting life insurance. The goal is to protect them from your debts and to help them move forward without any significant financial setbacks your death may cause.

Remember not only to count current children but ones you’re planning on having in the future and the possibility that your parents may become your dependents, too.

Liabilities and Debt

If you have debt, you may want to consider how long you anticipate carrying it. Given that families of the deceased become financially responsible for one’s debt after death, you may want to consider providing enough coverage to pay it off.

For example, the families of those who own homes but haven’t paid off their mortgages become responsible for paying off the loan’s remaining principal. If you have a mortgage, consider a rider for your life insurance that will cover the remaining mortgage balance if you die before the home is paid off.

Business Dealings

People in business with others or who have a business partnership should consider a term life insurance policy that governs how the company will be managed after their death. Term policies are usually the best option because the term length can be set to cover your working years. After retirement, you may have a plan for tying up the loose ends of your business and no longer need a term life policy to help settle those plans.

How Much Can You Really Save?

How much money you save depends on many factors, starting with your age, the amount of death benefit you want, whether you smoke, and the type of life insurance policy you select. The following charts are provided for illustration and do not directly reflect the quote you will get for life insurance.

Average Cost of Term Life Insurance by Age

AgeMenWomen
30$22$18
40$31$27
50$76$60
60$219$153
The following dollar amounts are average monthly premium estimates for a 20-year, $500,000 term-life policy for non-smokers averaging the low and high end of the pricing spectrum.

 Average Cost of Whole Life Insurance by Age

AgeMaleFemale
30$421$373.84
40$652$522.94
50$1,057$837
60$1,725$1,406
The following dollar amounts are average monthly premium estimates for a 20-year, $500,000 whole-life policy for non-smokers averaging the low and high end of the pricing spectrum.

Whole life insurance has many more variables and includes investment opportunities, which can drastically change the monthly premium.

When inflation is figured in, you’ll see an even more significant change between today’s rates for a life insurance policy and the rates you pay as you age. Buying when you’re young and healthy makes sense.