First of all, what is life insurance for? Quite simply, the most common purpose of life insurance is to replace someone’s loss of earning capacity when they die. For example, John and Sue have great jobs. If one of them dies, the other would have great difficulty making ends meet (which can be defined differently for each one). The best way to take care of that possible loss of income due to the death of any of them is with a life insurance policy.
Is there a best age to get coverage?
Now that we have established the usage, we may be able to better answer the first few questions. At what age should someone get a plan? The answer is really simple. For most people, as soon as someone depends on their ability to earn income for any reason and at any age, they need to cover that need with an insurance plan (we assume there are no liquid or illiquid assets available to cover this need). Your age is not a major determining factor as to when to get coverage. Only get it when your dependents need it.
Should you wait to get the insurance you need until you’re more likely to use it?
Now, once you know you need coverage, don’t wait (if you can afford it). Waiting for the moment when you are most likely to die is really not a good idea. Gambling on your family’s finances when you won’t even be around to lend a helping hand in tough times is just plain wrong. You should get the plan you need as soon as you can afford it or at least start getting some coverage and keep adding more. The fact is, no one knows when you’ll die, and while it’s less likely to happen at a younger age (which is why your premiums are lower), it can still happen. It’s bad enough losing a young loved one. It’s even worse if they don’t bother to leave money to take care of the other young survivors.
Should I get any coverage?
Of course, we’ve seen other uses of life insurance, but those aren’t as common as the reason for getting a policy above and should really be considered only after you’ve covered your real needs. Other uses might include a grandparent getting a policy for a very young child as a gift or to teach them about planning and the importance of having a life policy. A rich or not-so-rich person can gift an insurance policy to her favorite charity. There are many other much more complicated reasons for someone or some organizations to obtain an insurance policy. These are noble but not essential reasons for dependents.
Here are some reasons not to have any life plan. If you have never been married and no one depends on your abilities to produce income. If you have been married and the children are adults and your ex-spouse does not owe any alimony payments or other money. If you are very young and will not create any significant financial liability for your parents upon your death. If you get a loan and the lender does not require you to take out a policy that will guarantee repayment of the loan in the event that he dies before the loan is repaid. The bottom line is that if no one depends on your income, then you don’t need life coverage.
We hope this brief description will help you make better decisions. Talk to your advisor and see what they have to say before making a final decision. In fact, talk to at least three. You’ll get a lot of education for free (except for your time, of course). You can always feel free to ask us questions. Take care of yourself!