Life insurance is a subjective thing. What may work for one person may not for another, which is why it’s so imperative that everyone takes the time to figure out how and when to get a policy. Unfortunately, most people don’t start thinking about life insurance until it’s too late.
Today, we want to discuss when is the right time for life insurance. While it may be tempting to put the notion off for a while, you often can’t afford to wait on such a crucial decision. We’ll look at the various reasons and motivations for getting a policy, as well as the benefits of choosing sooner rather than later.
Step One: Determining the Why
Although we’re focusing on the when, it’s usually more helpful to pay attention to the why of life insurance. What is the point of getting a policy in the first place? Typically speaking, once you determine the why, figuring out the right time for life insurance will be much more apparent.
Here are some of the primary reasons why people get life insurance.
Funeral or Burial Expenses
According to recent data, it can cost upwards of $9,000 to have a funeral in the United States. Even if you want to be cremated, fees and expenses can still range between $6,000 and $7,000, which isn’t exactly cheap.
Because of the high price of funerals and burials, many people want to save their loved ones the financial burden by getting a policy that covers these prices. In some cases, you can get an insurance policy that is designed solely for funeral expenses, or you can include these fees in your total death benefit.
Since you’re not the one paying for the funeral, burial, or cremation, it’s a good idea to provide financial coverage for your family. Even if you’re relatively young and single, your parents, siblings, or other relatives may not have the money to cover these costs.
Income Replacement – Spouse
If you’re married, it may already be the right time for life insurance. However, there are a few variables that can help you determine the best amount of coverage to get. For example, if you and your spouse own a home, life insurance benefits can ensure that the mortgage payment and property taxes are handled.
For the most part, married couples that bought or owned property shared between them will want to get a policy to help cover any debts or expenses related to these assets. Even if you don’t own anything, you also need to consider any monthly payments that your spouse will have to handle individually if the worst happens.
Do you split rent and utilities on your apartment? What about food, gas, and other incidentals?
Overall, you should think about the financial burden that your spouse will be under if you’re gone. Also, now is not only the right time for life insurance for yourself but your spouse as well. If he or she dies before you, those bills will become your responsibility.
Income Replacement – Kids
Another milestone that should spur you to action in getting a life insurance policy is having children. The expenses that come with raising kids can be even more of a strain if you or your spouse die unexpectedly.
By getting life insurance, you can not only provide financial stability for the everyday cost of living, but you can also ensure money for other things, such as college. Typically speaking, the amount of your death benefit will be much higher when buying a policy to protect your kids, so plan accordingly.
If you’re like most Americans, chances are that you have some significant outstanding debt. Mortgage payments, car payments, credit cards – all of this debt is your responsibility to pay off.
However, if you die, what happens to that debt? In some cases, it could pass on to your relatives or spouse. So, even if you don’t necessarily have to replace your income or cover any monthly expenses, your debt could still be a substantial burden.
Different kinds of debt have varying rules that depend on the state you live in, but here is a brief overview.
Anyone who is on the mortgage with you is liable for any outstanding balance. If a relative wants to move into the house, he or she will have to assume the mortgage payment.
For example, let’s say that you bought a home or condo under your name. Now you and your significant other live together, and he or she will want to live there after you’re gone.
Even though your name wasn’t on the mortgage, he or she is liable to continue payments. This is why having a life insurance policy can help mitigate these expenses.
This debt is handled similarly to a mortgage. Anyone who co-signed on the car with you assumes the rest of the debt. If no one else is on the loan, the lender can repossess the car. However, if a family member wants to keep using the vehicle, he or she has to maintain monthly payments.
Fortunately, unless these loans were co-signed for, lenders can’t come after your loved ones once you’re gone. This is also the same process for any outstanding credit card debt.
Debts and Your Estate
Although some liabilities may not transfer to your family or spouse once you die, that doesn’t mean that lenders can’t come after your money. Any assets or finances you own can be used to repay debts, which means that those assets won’t go to your loved ones. If you can’t cover your debts entirely, then your beneficiaries may wind up with nothing.
So, even if your debt won’t become someone else’s burden, it can still impact the legacy you leave behind. If you want to make sure that your assets and finances aren’t wiped out by outstanding debt, you should get a life insurance policy that covers everything.
Step Two: When is the Right Time for Life Insurance?
Once you determine the reason why you should get a policy, the next question is when. As a rule, the earlier you shop for a plan, the better off you’ll be in the long run.
The fact is that life insurance is age-banded, which means that it will only get more expensive the older you get. For example, buying a plan at age 22 is going to be a lot cheaper than waiting until you’re 42.
In many cases, if you waited until some major milestone (i.e., buying a house, having kids), you might be setting yourself up for higher premiums. Instead, it may be better to get a general policy and then adjust it as necessary once those milestones take place.
At first, your death benefit may go to your parents if you’re single, and then go to your spouse after you get married. The death benefit may also increase based on financial obligations and debts you accrue over the years.
Factors That Affect Your Life Insurance Options
To fully understand when is the right time for life insurance, let’s take a closer look at the variables that insurers pay attention to when drafting a policy. Knowing how these factors could influence your monthly payments may inspire you to act sooner rather than later.
- Age – As we’ve already discussed, the older you are, the more expensive life insurance can be.
- Medical History – Insurance agencies will want to pay attention to your family’s medical history to see if you have a higher risk of various illnesses or conditions, such as heart disease.
- Physical Health – If you’re not particularly active, your premiums could go up as a result. Also, some high-risk habits (like smoking) could prohibit you from getting coverage at all.
- Illness – If you try to get life insurance with a long-term or debilitating disease, you’re facing an uphill battle. Because you never know what the future will hold, it’s better to have a policy now before you get sick.
Overall, the higher risk you are, the less likely you can get the coverage you want. Let’s say that you’ve determined a minimum death benefit of $100,000 for your spouse and your kids. However, thanks to an unhealthy lifestyle and waiting a few years to talk to an agent, the most you can get is $70,000. Can your family afford that kind of disparity?
Bottom Line: Now Could be the Right Time for Life Insurance
You may not realize it, but getting a policy right now is probably going to be better than waiting. Even if you have minimal debts, you’re single, and you have no kids, your policy will be a lot cheaper if you start sooner.
Not only that, but think about the future – will you want to have kids once you get married? Do you want to own a house with your significant other? If so, why wait until after you have those things? By then, your age and health could cause your premiums to increase substantially.
Instead, talk with one of our agents today and get a free consultation. We can help you determine the best policy for your current needs. And we’ll work with you to adjust it whenever life changes. Don’t wait until it’s too late – act now.