Do you need life insurance when you are wrong?
I‘m constantly amazed at the fact of how many young people I come across that don’t have any life insurance. While they all have there different reasons, the most common reason I hear is that it’s too early to think about life insurance. I couldn’t disagree more.
Most Important Question:
Are you supporting individuals whose livelihood depends on your income? If the answer is yes, it’s time to look at life insurance.
Now, you may be saying: shouldn’t I wait to get a policy? Why should I pay premiums when I have so many other checks to write? Well, the reluctance is understandable: the perception is that life insurance is for old people, and when you’re 30 or 35, chances are you’ve got a long, great life ahead of you. But in financial terms, here is why this can be advantageous.
Healthy is Good
Typically, Americans shop for a life insurance policy in the middle of their life spans – when they are in their forties or fifties. At that time, they may have already fallen into the grip of bad habits (smoking, obesity, heavy drinking) and diabetes, heart disease, cancer or HIV may have entered their health picture. All these conditions can jack up premiums or make it harder to get a policy.
Term Life Insurance is Cheap
Okay, maybe you won’t have to contend with any of the above health risks at 45 or 50 – but who knows? Buying a term insurance or permanent cash value life policy early in life, before you have to encounter any of these problems, should allow you to pay less expensive premiums. (Presuming you don’t face recurring risks to your health and safety today.)
Did you know that premiums for standard-risk term life insurance fell 50% between 1994 and 2008?
Premiums have been getting cheaper and cheaper for new term life policyholders, partly because the mortality rate has dropped over the decades. In fact, the non-profit Insurance Information Institute says term insurance premiums have fallen by more than 4% per year since 2000, and the premiums on cash value policies are averaging roughly 5% lower today compared to a decade ago.
Do young singles need life insurance?
Good question. Some financial consultants will tell you there is no pressing reason for it. Yet if you are single, buying a term life insurance policy (or even a permanent life policy) early on could bring you a better deal and potentially guarantee your insurability. I have to admit that I did not do this. But I was fortunate to take out a term life policy early enough that the premiums were still very affordable.
Maybe it’s time. Time passes, things change, and so does your need for insurance. Even if you are insured, it’s important to keep up with change – as an example, the Insurance Information Institute estimates that about a third of families don’t update their life insurance coverage after a new baby comes home. I’m an exception to this stat. Not only did I increase my insurance after having our first child, but I’m now increasing it again with the soon arrival of our second. I increased the amount dramatically so that I won’t have to worry about increasing premiums if we have another child.
If you’re young and you haven’t yet talked to a qualified insurance advisor, think about doing so today – you may be pleasantly surprised how affordable life insurance can be.
This post is featured in the Best of Money Carnival at Gen Y Wealth.
This was prepared by Peter Montoya Inc. Securities offered through LPL Financial, Member FINRA/SIPC.
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Should add that this should be in addition to the life insurance one gets from their employer. Getting separate policy will help as it is additional funds and also to help if there is a lapse with your employment.
Being young, single, strapped for cash and have no financial responsibilities other than to myself I have no need for life insurance. I understand the rates may be great right now, but I am healthy and really have no need for it. But good advice to have in case things change in my life over the next few years.
Hey Craig, There is something you can do to build a solid platform you can use in life. Read “Become your Own Banker” by Nelson Nash, and work to set up your own personal banking system. If you get hung on the insurance part of the concept, you did not understand.
You can get back to me and we can discuss on it.
Tough to say. Life insurance companies exist b/c they make money off you. if you have nobody to support, forget it.
Once you accumulate assets, with liabilities, sure!
Financial Samurai´s last blog ..I Saw My “FlashForward” And It Was Beautiful
The numbers I am about to quote are Canadian – and I do not know how American rates would compare – but $1,000,000 of Ten Year Renewable Term insurance for an “averagely healthy” 30 year old non-smoking male would cost $50/mth. A “very healthy” non-smoking male age 30 would pay $36/mth. Since health changes are NEVER expected – I would love to know how many heart attack or cancer or diabetes victims KNEW the week before their diagnosis that they had something – it is ALWAYS a good idea to get something in place. If those prices are too high – look at $500K – or $250K
Wayne – good piont. I got a policy back in college & it’s been nice knowing between jobs that if anything happens to me my kid will be OK & my family won’t have to scramble for money to bury me.
Craig – While I can understand where your coming from…. even a little five grand policy would help out your parents or whoever would be held resposible for settling your affairs.
I joke you not, this last summer I know two people who were youg & healthy come to their end.
One had a undiagnosed health issue (enlarged heart). Healthy single guy – ate organic, rode his bicycle to work, etc. Went to bed & never woke up.
What bailed his family out was his ex-wife forgot to drop him from her employer life insurance.
The other was involved in a water related accident during a family outing. He had no insurance of any kind. His family(brother & parents) had to scramble (i.e. skip mortgage pymts)to get the money just to cremate him.
Yes, you can chide both the family & the deceased for no emergency fund, etc however, how many people expect to bury a 28 year old? There have been three fundraisers so far for money to bury him, cover end of life expenses & resolve his bills (which were thankfully few). The financial stress on the family has been significant.
For the sake of those who’ll be responsible of taking care of you, you might want to look into a small policy to cover the basics.
As soon as our daughter was born, we got supplemental TERM life insurance. That is in addition to the cheap option our employer offers (6x salary for $13/mo.). However, please don’t be misled into buying WHOLE life insurance–it’s a complete scam and your money is better invested elsewhere.
When baby #2 arrives around year end, we will not be changing/adding insurance. We locked in decent rates on a 30-year term policy for more than enough coverage when we were 27/29 so there is no need. We pay $74/mo. for husband’s $500K and my $200K plus we’ve got our employer coverage that’s around $26/mo. for another $700K combined. So for around $100/mo. we’ve got $1.4 Million for the 2 kids (or $500K for me and $900K for my husband if only one of us were to go). More than enough to pay off house and college for kids and have a giant safety net if we become single parents.
While term life insurance covers families in their early years, a need still exist to own a “nominal” whole life policy bought during the early years at a much lower premium than waiting to purchase this whole life policy at an older age. Once term life policy expires, too often, folks delay purchase of replacement insurance resulting in lack of coverage or find now older they are unable to afford similar term life insurance.
The older one is, the more costly your insurance will be so cover yourself early in life while rates are less costly.