Only 52% of American adults say they have life insurance, and younger generations are even less likely to have coverage in place. It’s easy to put off buying life insurance when you’re still relatively young and feel like your risk of unexpectedly passing away is low. However, even if you expect to live for at least a few more decades, it likely makes sense to consider life insurance.
Here’s a look at the top seven reasons to buy life insurance sooner rather than later.
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1. Locking in Lower Life Insurance Premiums
A person’s age is one of the most important factors in what they pay for life insurance coverage. Overall, younger people have longer life expectancies and a lower risk of developing serious illnesses, which makes them less expensive to insure. Since premiums typically remain the same for the length of the policy, consumers who buy coverage earlier can enjoy significant savings over time.
To estimate the potential savings, consider a healthy 30-year-old woman who wants to buy a $1 million, 20-year term life policy. At 30, average monthly premiums are around $25 to $35. If she waits until 40 to buy the policy, average premiums increase from $40 to $65 per month. If she delays until 50, the same policy costs around $95 to $135 monthly. At age 60 and beyond, costs continue to rise. Keep in mind that if this individual were to purchase the policy at 30 for 20 years, she would still need to repurchase (and reapply) at age 50 for those same rates.
2. Take Advantage of Easier Coverage Approval
Health is another major factor insurers consider when selling life insurance policies. Pre-existing health conditions may increase the risk of passing away unexpectedly, and for insurers, this means a higher chance of paying a claim. Consumers with certain health conditions may face higher premiums or even be denied coverage altogether.
As people get older, their risk of developing certain serious health conditions increases. Cancer, heart disease, and type 2 diabetes are just a few examples. By securing life insurance sooner rather than later, relatively healthy consumers can take advantage of their current circumstances. If they develop severe conditions later in life, their existing coverage remains unchanged.
3. Choose From More Life Insurance Options
Some life insurance options are more readily available to people who are relatively young and healthy. Younger applicants typically can secure higher coverage amounts and longer coverage lengths than older applicants. They’re also more likely to be offered a streamlined application process without a traditional medical exam.
While getting older reduces consumers’ options somewhat, there are still plenty of life insurance plans available for people in their 50s, 60s, and beyond. Some life insurance companies even issue policies up to age 85 or 90.
4. Build Life Insurance Into Your Financial Plan
Life insurance is not just a way for consumers to replace their incomes if they pass away unexpectedly. It can also play a key role in building a sound long-term financial plan. Buying life insurance earlier gives consumers more time to work the policy into their overall goals.
For example, some people use permanent life insurance policies to work toward various savings goals, from paying for their children’s college tuition to funding their own retirements. Others use life insurance to diversify their financial portfolio or create an inheritance for their children.
5. Earn More Cash Value Over Time
Some permanent life insurance policies have a cash value account. A portion of the premium payment is deposited into the cash value account, where the funds earn interest or, in some cases, dividends. Consumers can withdraw or borrow money from the cash value while they’re still alive. For people who are interested in this type of policy, getting coverage sooner means the cash value has more time to grow.
The exact growth rate varies depending on the type of policy and the insurer. In some cases, the cash value grows at a fixed rate set by the insurer. In other cases, it grows based on market interest rates or the performance of an index, like the S&P 500. Over the years, there is the potential for significant growth.
6. Shield Loved Ones From Your Outstanding Debts
Americans’ debt levels have risen steadily in recent years, and overall, the average consumer debt balance now stands at $101,915. Younger people who are working hard to pay off their debts may not think about what happens to those debts if they pass away unexpectedly.
Some debts can be inherited by loved ones. In community property states, such as California, surviving spouses may be responsible for their deceased spouses’ debt. A joint account holder on a credit card or a cosigner on a mortgage or other loan can also become responsible for debt. Life insurance provides a lump-sum death benefit that helps loved ones cover these obligations.
7. Maintain Your Family’s Standard of Living
For both the young and young-at-heart, the idea of suddenly passing away is hard to imagine. Still, when the unthinkable occurs, it can throw families’ finances into disarray. A quarter of U.S. households would feel financial hardship within just one month of their primary wage earner passing away. They may struggle to pay everyday bills or work toward long term goals.
Life insurance helps consumers provide crucial financial security to those they care about. With a life insurance policy’s death benefit, surviving family members can continue paying their rent or mortgage and remain in their current home. They’re able to keep up with day-to-day expenses, from groceries to childcare.
Putting It All Together
Consumers have many reasons for waiting to buy life insurance. Some have not gotten around to it, while others do not like thinking about death. Whatever your reasons for delaying, it likely makes sense to look into life insurance options sooner rather than later.
By considering life insurance earlier, consumers may enjoy easier coverage approval or lower monthly premiums, among many other potential benefits. The right type and amount of coverage vary from person to person. Talk to a trusted life insurance agent for help finding a policy that works for you.