Overview
Life insurance can be a great addition to your long-term financial planning strategy. But it’s a common misconception that life insurance is only necessary for older people. In reality, the right time to purchase life insurance is whenever it makes sense for your family, whether you’re a new parent, are getting ready to retire, or any time in between.
In this article, we’ll explain when the best time to purchase life insurance is, and share some common scenarios when having life insurance can be beneficial.
When is the Best Time to Purchase Life Insurance
There isn’t a single “best” time to buy life insurance. Everyone has different needs, so the best time to get life insurance really depends on your unique situation and goals for the future. Here are a few instances when it might make sense to purchase a life insurance policy.
When you’re young and healthy
In terms of cost, the most ideal time to purchase life insurance is when you’re young and in good health. Life insurance premiums get more expensive as you get older, and if you have pre-existing health conditions, you’ll probably pay more for coverage.
If you think that you’re too young to get life insurance, consider this: if you purchase life insurance at a young age, you’re able to lock in a low rate for the duration of the policy. If you wait too long, you’ll likely end up paying a much higher premium.
When you have financial dependents to support
One of the main purposes of life insurance is to financially support your loved ones if you pass away unexpectedly. If you’re the breadwinner of the family or have dependents who rely on your income, purchasing life insurance can be very beneficial.
For example, consider whether your spouse would be able to pay for school tuition and cover your mortgage payments without your income. If your aging parents rely on you financially, think about what would happen if they no longer had access to your money.
If you’re currently responsible for the financial needs of anyone else, regardless of your age, life insurance could provide some peace of mind.
When you want to leave money to heirs
Permanent life insurance can be a great tool if you intend to leave money to heirs or a charitable organization after you pass away. When you die, your beneficiary will receive the death benefit from your policy, which can be used for any purpose and is usually tax-free.
When it comes to inheritance, life insurance can simplify the process of settling your affairs. Your designated beneficiary will receive the money in a lump sum. Your estate won’t go through probate, and if estate taxes are owed, your heir can use money from the policy to cover them.
Using a life insurance policy for inheritance can also help avoid familial disputes. Only your named beneficiary will receive the money, which can limit potential conflict about who’s entitled to what after your death.
When you want to build long-term wealth
If you want to build personal wealth over time, life insurance can help you do that. Permanent life insurance policies, like universal life insurance and variable life insurance, have a cash value component that acts like a savings account. A portion of each premium payment goes towards the cash value, which grows at a certain interest rate (either fixed or variable, depending on the policy type).
As the policyholder, you have the option to borrow or withdraw the cash value while you’re still living. Some policies allow you to use cash value to change the frequency and amount of your premiums. If you don’t use your cash value, it will go to your beneficiary when you pass away.
When you want to allocate money for funeral expenses
Another good time to consider purchasing life insurance is when you want to set aside money for your funeral costs. The most common way to do this is by getting final expense life insurance, also called burial insurance.
Final expense life insurance is a type of whole life insurance that’s easier to qualify for than traditional policies. You don’t have to take a medical exam, so it can be a great option for older people or individuals with pre-existing medical conditions.
The death benefit from a final expense life insurance policy is typically used to cover end-of-life expenses, like a funeral, cremation services, and final medical bills. Allocating money for these costs can ease the financial burden on your loved ones after you pass away.
The Point
The best time to get life insurance is different for everyone. If you’re debating whether to purchase a policy, it’s important to think about your current financial obligations and your long-term financial goals.
For some people, getting life insurance in their 20s makes sense, especially if they want to lock in the lowest rate possible. For others, however, life insurance might not be beneficial until closer to retirement. In some cases, life insurance is never really necessary.
You should purchase life insurance whenever you feel like it’s beneficial for your family. But remember that it’s always best to get life insurance before you need it. Even if you’re young and healthy, life insurance can still provide peace of mind in case the unexpected happens.
by your friends at The Daily Navigator
