April 25, 2021

What's the Best Age to Buy Life Insurance?

Read more about Life Insurance

What's the optimal age to buy life insurance? Younger is better, but do you really need insurance at 25? Find out when a policy fits into your life.

Rule of thumb: It's best to buy life insurance between 25 and 40.

This is because the rates are much cheaper and it's easier to get approved.

But in some cases, it may be smart to opt-in later in life. Learn the top reasons why people buy life insurance and which age is optimal for each.

What's the best age to buy life insurance?

First, ask yourself: Why do you want a life insurance policy?

  • If you mainly want income replacement…
    Buy a policy early to get affordable rates. But not so early that the payout wouldn't be truly beneficial.

    You'll want coverage when your income becomes indispensable. For example, maybe you're the main breadwinner or just had kids. The policy should last as long as you expect to support dependents or a spouse with your income.

    For many people, getting a term life policy between the ages of 25 and 30 is the way to go.

  • If you want to make sure your mortgage will get paid off…
    To avoid more expensive rates, try getting your policy as soon as you've decided to buy a home. Before age 40 is ideal (rates usually jump a lot after that).

    Each year, life insurance rates jump by 4.5-9% - so, sooner is better. Opt for a term policy for as long as you'll be paying off the mortgage.

  • If your main concern is covering final expenses…
    Consider a permanent life policy so you don't have to worry about coverage expiring.

    People under 40 should look into whole life as soon as they're able. This is so you can start building cash value sooner.

    If you're over 40, consider final expense insurance. This is a less expensive type of whole life insurance with a smaller death benefit. Plus, it's usually easier to get approved than other types of permanent insurance.

  • If you mainly want to transfer wealth to beneficiaries…
    Using life insurance as a strategy for wealth transfer can work at any age. However, it's usually a better fit for older adults (50+).

    One option is to get single premium life insurance, which is designed for wealth transfer.

    You pay one premium upfront instead of monthly payments. You're immediately guaranteed a payout of 2-4x the premium, and your beneficiaries receive the payout tax-free.

Should I get life insurance in my 20s?

The truth is, not everyone in their 20s will need life insurance. But if one of the following applies to you, you should consider getting a policy.

  1. Someone depends on the money you bring in.
    "Dependents" aren't just children. This applies to anyone who relies on your income: A spouse or partner, an aging parent, or a special-needs sibling.

  2. You have co-signed debts or accounts.
    Any debts you have with a co-signer or joint account holder would be on that person's shoulders if you were gone.

  3. You just bought (or are about to buy) a house.
    A life insurance policy could cover your outstanding mortgage. If your mortgage goes unpaid, the bank could seize your home.

  4. You know you'll have a family in the future.
    Buying a policy before you have kids will ensure you get the best rates. And you can usually expand your coverage later on, if you like.

For most young people, we recommend getting a term life policy. The term should last as long as you plan to support any loved ones or pay off a significant expense, like a mortgage.

Bottom Line

When it comes to buying life insurance, the earlier, the better. but don't buy life insurance at an early age just to get cheap rates. You should buy a policy only if you know the benefit would be truly valuable to your loved ones. If that just so happens to coincide with affordable rates, then all the better.

Holly Zorbas is a assistant editor at CreditDonkey, a life insurance comparison and reviews website. Write to Holly Zorbas at holly.zorbas@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

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