If you’ve found yourself wondering about life insurance, you’re not alone. Adults of all ages are often unsure when the right time to get life insurance may be, if at all. The truth, however, is that this form of coverage is the kind of thing worth having even when you feel the least at risk.
Whether prompted by a jump forward in your career, getting married, having a child, or experiencing any big life change, feelings about protecting loved ones and assets can suddenly change over time. No matter what stage of life you’re currently in, it’s worth taking a step back and examining your present situation before making any decisions.
Read on to learn more about life insurance and when getting coverage may be a good choice for you.
What Does Life Insurance Actually Do?
Nobody likes to think about “the end,” which is why many people like to avoid the subject of life insurance altogether. Unfortunately, this can backfire and leave your loved ones and estate in a lurch should you pass unexpectedly or become seriously incapacitated. At the very least, you should know exactly what life insurance is and how it works.
With a good life insurance policy in place, your loved ones can be properly cared for after you die. The only people who actually receive a payout from your policy will be those named as a beneficiary by you. This payout is often used to help make up for lost income, to pay off debts, help cover funeral expenses, or handle other financial hardships that may be inflicted upon the beneficiary by your death.
While the beneficiary is a spouse or children in most cases, it can really be anyone you choose. Single people without children, for example, may name a parent, a sibling, or even a close friend as their beneficiary just to ensure funeral costs and remaining debts are not left as a burden.
Types of Life Insurance
Many people are also unaware that there are two main types of life insurance: whole life and term life. Whole life insurance comes with a guaranteed payout (no matter when you die) that can increase in value as time goes on and you pay more into it. People with a larger estate or many loved ones they want cared for after death may prefer this option, no matter how old they are. The younger you start paying into whole life insurance, the greater the final amount tends to be. There are also tax benefits.
Term life insurance is coverage for a designated period of time (often decades). If the policyholder passes away during this period, the amount on their policy will be paid out. Once the period is up, the policy ends without a payout. This option can offer substantial payouts at a lower premium cost and are quick, temporary solutions for life situations that are temporary. For example, parents may opt for term life insurance in case they die before their child grows up and becomes financially stable on their own.
In many other cases, someone who feels they may be too young (or old) for whole life insurance may be a good candidate for term life insurance since it is only for a set period of time. It’s important to discuss your options with your loved ones and your insurance agent before making a decision. There are also lesser-known options to consider, like variable life insurance, universal life insurance, and more.
The Risks of Not Having Life Insurance
In addition to becoming familiar with how life insurance works, it’s imperative that you know the risks of not having it. Thinking “Am I too young for life insurance?” can turn into “Oh no! What will happen if I don’t have life insurance?” before you know it.
This is especially important for younger individuals who are in good health and don’t expect to pass away anytime soon. For example, the COVID-19 pandemic has taken many families by surprise, with young parents in their 20s, 30s, and early 40s passing away quickly and unexpectedly. Without life insurance in place, their children, parents and young significant others have been left to deal with remaining expenses.
How Old Do You Legally Need to Be for Life Insurance?
In every state, an adult aged 18 years or older is able to purchase life insurance. However, there are many insurance providers and states that allow for legal guardians to take out life insurance policies for younger individuals, usually those no younger than age 14. While most teenagers are low risk, getting life insurance at this age can improve their insurability as an adult, as they will likely not need to go through a medical exam.
Regardless of age, you’re never too old or too young to start thinking about life insurance. At the very least, a good policy helps lessen the financial burden of an ever-uncertain future.