5 Reasons To Purchase Life Insurance At A Young Age

When most individuals are young, life insurance is the farthest thing from their mind. It's easy to put life insurance on the back burner when all one thinks about is a long life beset with expenses like rent, mortgage, car payments, and student loans. Unfortunately, financially delaying the purchase of life insurance has dire consequences, including a lack of coverage for funeral expenses and loved ones, and the destruction of retirement savings. Young people are eligible for a great deal of coverage for little cost, and all who buy life insurance while young are glad they did in the future.

Start reading to learn about the advantages of buying life insurance while young.

Cheaper Premiums

As every birthday passes, buying life insurance becomes more expensive. For example, with each birthday an individual has, the cost of term insurance increases an average of ten to twelve percent. Imagine paying an extra ten percent for life insurance every month for a twenty-year term policy. Waiting a decade means paying twice as much. When individuals wait until they are much older, the monthly premiums become punishing. The only way to fit life insurance into the household budget is to cut the coverage amount, leaving the beneficiaries underinsured. Compared to term life insurance, whole life insurance provides more comprehensive coverage, but at a much higher cost. Because of its expense, purchasing whole life at a young age is the only way most can afford the premiums on a policy with significant death benefits. The cheaper premiums are more than monthly cost savings and allow the purchase of a meaningful amount of permanent coverage. For universal life policies, the case for buying young is even more compelling. Universal life policies build a cash value that covers the rising cost of insurance that comes with age.

Continue reading to learn about how cash-value comes into play.

Cash-Value

Universal life and whole life policies provide cash-value accumulation. With these permanent life insurance policies, buying young allows for cheaper premiums and increased cash-value accumulation, as cash savings values take years to grow. Thus, older life insurance buyers see very little accumulation compared to younger buyers. Cash values provide many benefits, including tax-advantaged income and savings growth, increased death benefits, and a source for premium payments in later years. Those who buy policies too late are unable to reap these benefits. For whole life policyholders, this means accepting lower death benefits and forgoing a cash-value nest egg, and for universal life policyholders, it means possibly paying ever increasing costs of insurance out of pocket. Universal life policies provide inexpensive premiums at the start, but as the cost of insurance rises with age, the premium increases with it. Universal life policies are designed to use the accumulated cash savings value to offset these higher costs. For a universal life policy to be fully effective, buying at a young age is essential.

Continue to learn about why health is so important when it comes to buying insurance, and how this plays into age at purchase.

Healthy Is Great

Life insurance companies love to write policies for healthy customers, as profits rest on taking in a high amount of premium compared to claims payments. The industry's decades of actuarial data show the best way to achieve this is by providing insurance to young, healthy individuals. As their customer bases age, the insurance companies need to find new, healthy customers, so they offer options to attract the young and healthy, which means huge savings for those in the coveted category. It's wise to take advantage of this, especially because most individuals are less likely to have a disqualifying medical condition at a young age. Unfortunately, a lot of people develop health issues in middle age that preclude them from buying regular, inexpensive life insurance. At that point, if they have no life insurance, they have to either go without it or purchase costly guaranteed-acceptance plans, which provide limited benefits.

Those who abstain from smoking, work in safe occupations, and avoid dangerous activities, like hang gliding, qualify for better rates. For younger individuals, health is established via questionnaires and possibly a blood test. As people age, insurers demand more comprehensive tests to screen for issues like hypertension, diabetes, and cancer.

Continue reading to learn how purchasing life insurance young benefits retirement.

Retirement Plan

Life insurance fits into retirement planning especially well if you purchase it at a young age. Because it can serve as protection for survivors and as a growth vehicle, young individuals can use it for very long range retirement planning. Though term insurance provides no direct retirement savings benefits, it allows the purchase of large amounts of protection for little cost, which protects loved ones while leaving cash available for retirement savings plans. Everyone should have term life insurance when they need a high amount of protection, such as when raising a family while paying a big mortgage, and whole life and universal life policies for smaller, lifetime protection and retirement planning. These permanent policies accrue a cash savings value that can supplement a retirement nest egg. They also provide the opportunity to provide fully paid-up coverage during retirement years and, in the case of universal life, cash savings values to cover premium costs during retirement. A variable life policy provides the life insurance for a retirement plan. Cash savings values are invested in securities, and the value can then be taken as tax-free retirement income via a policy loan.

Continue reading to learn how life insurance can help with funeral costs.

Funeral Costs

Everyone should carry a whole life policy equal to at least the average funeral costs in their area. Whole life serves as the ideal vehicle because it provides permanent coverage with predictable costs and cash-value appreciation. A funeral cost policy should account for inflation. For example, if the average funeral cost today is fifteen thousand dollars, a young person should buy a twenty-five thousand dollar policy, since, god willing, a funeral won't be needed for many decades when prices will be much higher. In some cases, a younger person may find the cost of a whole life policy too high, especially if dealing with family expenses and needing a twenty- or thirty-year term-life policy.

The solution is a term-life policy with a conversion option. Since the term life policy provides more than enough coverage for the funeral cost, it serves that purpose temporarily, and the insured can convert a portion of the term policy to whole life at a later date. For example, they could convert twenty-five or fifty thousand dollars of a 500,000 dollar term-life policy to whole life. This can be done with no medical underwriting, so the conversion remains possible even if the insured develops a serious medical condition.