When Should I Get Life Insurance?
We heard it all:
“Life Insurance. Not exactly my priority, I got other bills that I have to pay now.”
“I’m too young for life insurance, I don’t have any kids so what’s the point?”
“I don’t even have a house, spouse or kids…I’m living the single life. Ill get life insurance when I need it.”
Most of these folks didn’t even question whether they need any type of life coverage. They simply don’t want it and that’s that.
All that is completely fine. Some people don’t need insurance.
Does anyone really need life insurance?
That’s a question for another time.
Today we are answering the question you searched for.
You obviously identified the high value a life insurance policy brings and want to know when you should be buying it.
When Should I Buy Life Insurance?
This question is one with no one correct answer. If you are looking for a “one fits all answer”, it would have to be: As soon as possible.
The first thing you should know is that two of the most important factors affecting your life insurance rate and eligibility are your health and age.
Life insurance companies pay out the death benefit when the life insured passes away.
They get premiums when the life insured is alive.
When the life insurance companies receive premiums, they usually invest a portion in order to make some profit. This means the longer they get premiums and the longer they have to invest those premiums, the more money they make.
For that reason, they are willing to offer lower premiums to younger and healthier clients under the assumption they will live longer.
Knowing this, when would life insurance be cheapest? When you are youngest and healthiest!
So we’ve identified when should you buy life insurance assuming we are talking only about age. The sooner the better.
So now lets jump into the question you meant to ask…
What Stage of Life Should You Buy Life Insurance?
This is a much better question.
We are all currently at some stage of our family life. You may be interested in a family but haven’t started one…and don’t plan to for a while.
Or your kids are on their own and you are working on your golf swing.
In each stage of life, there is an insurance product that may make more sense.
As we’ve identified in our last post Benefits of Term Life Insurance, the “growth” stage of families is a perfect time to start looking at life insurance options.
The growth stage is usually when a family is forming. Perhaps a young couple bought their first home. Maybe their first child was born. Maybe they rented out an apartment and bought their first dog.
In this stage, the family is likely experiencing an influx of bills and expenses. Whether it’s purchasing baby products or furnishing their place, the growth stage is expensive and stressful.
So where does life insurance come in and why is this a good time to buy it?
As a young family is being formed, as expenses rise, the need for a dual income also increases.
Should one of the incomes suddenly disappear, will the family be able to continue growing?
Will your partner be able to handle the future child expenses alone?
Possibly. But it’s not a risk that’s fair to take especially that a starter policy can be very affordable.
In a case like this, a good option would be to purchase a term life insurance policy that will cover your partners future earnings for at least 10 years as well as the mortgage.
You are probably thinking that will be very expensive. Lets take a look.
As our example, we will use Samantha and Jordan. Each of them earn $60,000 per year. In Ontario, their after tax take home will be around $45,000 per year. Together they make $90,000.
They are both 28 years old and healthy. They try to stay fit and go to the gym 3 times a week. We should all learn from these two!
On June 01, 2018, their lives changed forever…
Kylie was born!
Kylie isn’t cheap. Samantha decided she will be staying home full time for at least 4 years. They have no plans after that.
The first year the couple will receive maternity leave so they will get by. But after the first year, Jordan will be the primary income earner for this family.
Will Samantha be able to get by if something were to happen to Jordan? Will Kylie have a secure future without Jordan? Will Jordan be able to take care of their child and make an income without Samantha?
Lets help them sleep by pricing out a term life insurance policy.
Since this couple will need a lot of money over the next few years, lets price out a $1,000,000 term life insurance policy for each of them.
As healthy, non-smoking 28 year olds, Samantha will pay about $37.00 per month for the million dollar coverage, and Jordan will pay $57.00 a month (It’s more because he is a male). This is for a 20 year convertible and renewable term policy.
As you can see, for about $94.00 per month, both Samantha and Jordan will have a million dollar coverage should any of them pass away within the term.
A good tip for this young couple would be to covert their policies or at least a portion into a permanent coverage after a few years once they have a slightly larger budget. This will offer a lifetime of coverage.
“Full On Adulthood Stage”
Another life stage (which we named ourselves if that wasn’t clear) is the “Full On Adulthood Stage”.
In this stage, the family has passed the initial tough beginnings, is more established, perhaps their kids are a little older and hopefully the income has grown.
The family might be looking into purchasing a larger property with a bigger yard etc.
What role does life insurance play at this stage?
Well, lets take Samantha, Jordan and Kylie.
Kylie has just turned ten. Both Samantha and Jordan have full time jobs earning $90,000 after tax together.
They just bought a beautiful townhouse in Oakville and have a mortgage of $500,000.
As long as both of them keep working, they will get by with their bills and expenses. They also promised to pay for Kylie’s tuition should she decide to pursue high education.
Why is this a good time to buy life insurance?
As we all know, the bills never stop.
The family has a mortgage, has possible future schooling payments and who knows what else.
If their income was cut in half, the remaining partner would drown in expenses and have to make major life sacrifices.
A term life insurance policy would still make sense in this scenario but a better option would be to have at least a portion of the coverage permanent, assuming the budget for that exists.
The permanent coverage would offer life time coverage for the family. This is great because this gives the parents the ability to leave their child a cash inheritance.
For a more complex quote, it’s a good idea to get in touch with your insurance broker and figure out what is the best coverage and from which life insurance company.
This brings us to the next stage in life.
“The Golden Years”
If you have kids, they are now adults living their own lives with their own life insurance policies.
This is your turn to enjoy Mimosa’s on the beach.
“The Golden Years” stage is the time to enjoy the fruits of your labor.
Your kids have left the nest, you have the assets to ensure your partner can live comfortably without you…so what’s the point of life insurance?
Why life insurance is still a good idea.
If you have kids or a partner, you can still get a life insurance policy that will pay out in the event of a death.
This gives you the opportunity to leave your kids or spouse a decent amount which can be used to cover final expenses.
In many cases, you can purchase a permanent policy and get a larger payout than the premiums you put in! This makes it a great investment.
Hopefully it is clear that life insurance is a product that is beneficial in any stage of life.
Whether you are a young family on a tight budget or enjoying your retirement and want to leave some money to your children, life insurance is something to have.
But when is the best time to buy life insurance?
The answer has to be: now.
Regardless of what life stage you are in, you should have life insurance.
It’s a lot cheaper to buy life insurance when you are younger but it’s also understandable that you may not have the budget for that permanent policy. Term insurance may be a better option at that time.
You may be the guy or gal who doesn’t have a partner yet, let alone a child. But if you plan to have a family in the future, life insurance is something you can benefit to have. Since you are buying when you are young, you will save a lot of money.
Whether you can only afford term life insurance at this time or can get a whole life policy, life insurance is not something to “wait until you need it”.
I am so happy to see all these responsible people looking at life insurance and when should you buy it! I hope to see a future influx of these questions which I will be happy to answer. If you reside in Ontario and would like to have a chat with me, feel free to email me at email@example.com or fill in my life insurance quote form!
What do you guys think? If you have any questions please comment below!