What age should you buy life insurance?

A Guide for First-Time Buyers

As far as life insurance policies are concerned, the age and health of the applicant are the two most crucial factors. These affect both the eligibility and premium range; obviously, the younger and healthier the person is, the cheaper the premiums will be.

The latter is the chief cause for concern for people uncertain of the term duration they need, as renewing the old or buying a new policy after 10 or 20 years is guaranteed to be considerably more expensive.

Still, it’s fair to say that there is an option for everyone’s pocket if they plan in advance. People with young families in particular have a lot of factors to consider as the children-related expenses increase over time (college tuition, anyone?).

However, as is always the case with life insurance policies, there is no one-size-fits-all approach. Every individual is different, and each person’s circumstances are unique. However, this pandemic has shown that life indeed is uncertain, so rethinking your insurance policy strategy might be in order.

Let’s see some examples that will help you decide when to buy life insurance. Or calculate what’s the best for your situation.

People in Their 20’s

In accordance with the “get a life insurance policy while you’re young and healthy,” mentality, the 20’s would be the ideal age. Many young people think that they don’t need a life insurance policy, and it’s not difficult to see why.

When you’re young and healthy, complicated future plans (let alone your death) seem unreal or indeed very far away (both hopefully true). Still, whether we like it or not, life circumstances can change overnight, and we will all move on one day. There’s no way to get around it, so why not buy a life insurance policy while the rates are affordable?

Most insurance companies offer fairly low rates for healthy people in their 20’s ($20-$25 a month,¹ on average for a 20-year insurance policy, for example).

The main question here is which policy to choose. Generally speaking, there are two common options for people in their 20’s: term life and permanent life insurance. For many, it may be difficult to pick one even after comparing offers.

Term life insurance policies provide coverage for a set term. As mentioned above, renewing a policy can be quite expensive after 10 or 20 years, term life insurance is arguably a better option as the rates get locked in while the insurer is in their 20s. Most companies let you convert some or all of your Term Life coverage into a permanent life policy. If you purchase a term life policy in your 20s, you may also have options to convert the term policy to permanent life coverage when you can afford the higher premiums.

Permanent life insurance policies remain valid for as long as the premiums are being paid. Additionally, there are policies that come with a cash value, which means that they can serve as a saving account in the long run.

Finally, there is universal life insurance, which can also be coupled with a cash value, so comparing offers beforehand is crucial.

Again, buying a Permanent or Universal life insurance policy in your 20’s will allow for accumulation of considerable sums of money (lower premiums plus a cash value) and can actually save a fortune in years to come.

People in Their 30’s

The majority of people start thinking about a life insurance policy when they reach the age of 30. The reasons are clear: many people decide to start a family at this age or already have a small child or children. Suddenly they realize that they might (and will) need more money in years to come, as there are additional (and considerable) costs to consider.  If something were to happen to them, it could put their family at risk, financially.

There are a number of reasons that come to mind: mortgages, childcare expenses, medical bills, college tuition savings…

If you haven’t already bought a life insurance policy in your 20’s, the 30’s are the right time. For some, it may be the optimal time as people in their 20’s often choose a life term insurance policy because of lower incomes and the need to manage a lower monthly payment (Term Life is often the most inexpensive type of life insurance).

In your 30’s, however, somewhat higher life insurance rates shouldn’t pose a problem. Again, they will remain fixed in years to come, so it’s recommended to get the policy while you’re still healthy and have a solid income.

Most employed people in their 30’s have some kind of insurance policy provided by their employer. Whether it is sufficient for a lifetime is another matter entirely, and if they change jobs, in many cases they can’t take their insurance policy with them. Similarly, many people who bought a small and temporary insurance policy in their 20’s might wish to upgrade now that they have more money.

It is generally not a good idea to rely on the policy provided by the employer alone. Normally, these types of policies provide a payout amounting to one to two times your annual salary, which is nowhere near sufficient to guard you and your family against unforeseen circumstances.

It is generally recommended to obtain a policy amounting to anywhere between 10-12 times² your annual income.

People in Their 40’s

If you’ve reached the age of 40 and you still don’t have any kind of insurance policy, it’s high time you got one. This is the age where policy premiums will start to rise dramatically.

Again, adjust your plans depending on what you already have (or don’t have). Employer-provided policies and small policies you may have bought earlier just might not be enough.

Normally, people at this age begin to think about potential health issues they may be facing in the future, and there are still financial dependents to consider for most of them.

Obviously, at the age of 40, policy rates are bound to be higher than when you’re 20, so lower level coverage policies are a better choice for many people.

People in Their 50’s and Above

Buying a life insurance policy in your 50’s (let alone later on) isn’t a cheap venture. At that age, some health issues will have emerged.

In most cases, outstanding debts get higher over time, children grow up and medical bills begin piling up. This means that buying a policy amounting 10-15 times your annual salary might well be closer to 15.

¹ Businessinsider.com, The average life insurance rate by age, sex, and coverage type.
² Daveramsey.com, How Much Life Insurance Do I Need?
³ Quotacy.com, Why buy life insurance through Quotacy?