Many younger individuals think life insurance is not necessary early in adulthood. They may think it’s only worth looking at for people with large families or lots of income. But the truth is that life insurance can be a smart investment at any stage of life. The best policy type for you will vary by age and many other factors, but the financial protection offered is almost always useful. For those wondering if life insurance is worth it, this article will explain how looking for life insurance quotes can be a smart choice in every decade of life.
People in their 20s
Employers may offer life insurance in their benefits packages, but these often cap at $50,000 for tax reasons. That may sound like enough for a single person in their 20s, but plans can change, and employees can’t take workplace policies with them. That makes an external life insurance policy a good option to consider.
Life insurance premiums increase with age. But once you get a policy, your premiums are fixed for the entire policy term. So, people in their 20s can lock in the lowest premiums regardless of future plans or responsibilities.
If your plans change, such as if you have children, you already have some coverage. You may not have to worry about getting additional coverage, but you can also upgrade your policy if you need a larger death benefit.
People in their 30s
Many people begin getting married and starting families in their 30s, yet premiums are still fairly cheap. According to Forbes, a 30-year, $500,000 term life insurance policy costs $444 per year for a healthy 30-year-old male and $336 per year for a healthy 30-year-old female.
Therefore, this can be a good time to buy life insurance, especially if you’re a new parent. You can save on premiums while ensuring your partner is protected and has the funds to provide for your children if you pass away. You can even buy life insurance for children so that you have a financial safety net in the event of your child’s passing.
People in their 40s
Many people move up in their careers and earn significant incomes in their 40s. They may also have more assets and responsibilities. This can make permanent life insurance a smart choice at this stage of life. It offers you lifelong coverage but costs more than term life insurance. However, the higher cost may not matter as much to someone who has managed to increase their income.
Permanent life insurance also comes with a cash value growth component, which can help you build more wealth as your income grows. Part of each premium goes into this component, growing tax-deferred at a specified rate.
When the cash value is large enough, you can borrow from it or withdraw from it. You can also receive the full amount minus surrender charges if you give up the policy. In any case, this makes a permanent policy another source of savings to put toward retirement, college education for children, refinancing debt, and more.
People in their 50s
By the time you reach your 50s, your kids are likely on their way out of the house. This means that your coverage needs may change. Your partner may not need to replace as much income to cover beneficiaries, which could mean getting a life insurance policy with a smaller death benefit to save on premiums.
Cash value is still helpful at this stage of life. People in their 50s can diversify their wealth sources away from retirement accounts with this cash value and even tap into it to help with their children’s college education.
People in their 60s and older
Many people begin retiring around this stage of life. But life insurance doesn’t lose its importance. It becomes useful for leaving a legacy in a few ways. First, the death benefit is tax-free in most cases. That means you can pass more wealth down to your heirs when you pass away by avoiding some estate taxes. Similarly, policyholders in their 60s and beyond can continue using their cash value to supplement their retirement savings, upgrade their lifestyle, or help other family members.
Newer policyholders at this age may want to consider no-exam policies, such as guaranteed issue life insurance. These policies skip the medical exam, which can speed up the application process and reduce inconveniences.
The bottom line
Life insurance can be useful from early adulthood all the way into old age, but its purpose can change as you get older. In your 20s, you can lock in low premiums now and supplement any workplace coverage you have. This makes handling future plans easier from a life insurance perspective.
Those in their 30s and 40s may have started families, and this is the most obvious use case for life insurance. It can give you peace of mind that your partner can provide for your children if you pass away, not to mention the wealth-building potential cash value offers.
In your 50s, you can also take advantage of the cash value to save for retirement and help cover your adult children’s education costs. The death benefit may not be as necessary to help them anymore, but it still plays a role in estate planning.
Estate planning becomes more important as you move into your 60s. Life insurance can help avoid estate taxes, allowing seniors to pass more of their wealth to their heirs. Plus, seniors can use their cash value to supplement their retirement funds and help their children and grandchildren . Prospective policyholders should ultimately look at their age, financial situation, and coverage needs before determining which policy works best for them.