This is a special contribution for MegaInsights by Jeff Gitlen. Jeff is a Content Associate at LendEDU, a company dedicated to helping consumers with their personal finances. I was glad to receive this post from him and I’m sure that followers of this blog in US and Canada will find it to be very useful. It is being posted here unedited. You can read more about Jeff and LendEDU at: LendEDU Facebook, LendEDU Crunchbase, LendEDU on TechCrunch.
While many adults in America don’t carry life insurance, it’s an important thing to consider. In a 2017 study, 84% of Americans agreed that “most people” need life insurance, but only 59% of Americans have a policy themselves. Of those 84%, a third have the most basic coverage available.
A common question about life insurance is whether you can be too old to get it. Unfortunately, there isn’t a simple yes or no. The truth is there are different types of policies for different stages of life. One thing that is always true, however, is that the longer you wait, the more you’ll pay. With so many options out there, comparing the best life insurance companies is vital to help you choose the policy that meets your needs.
What is Life Insurance?
The basic definition of life insurance is a policy where you pay a monthly or yearly premium, and in the event of your death, the insurance company will pay your designated beneficiaries a lump sum of money. These funds are usually used for burial expenses, to clear up any remaining debts, or to support your family after you’re gone. In the case of a working parent with children, life insurance money can be used to pay off the family mortgage or help support the family in the months immediately following the loss of your income. You should still look into life insurance even if you’re single and don’t expect your debts to fall to a loved one.
There are two main types of life insurance: term life and whole life. In a term life policy, you pay a set premium for a set amount of insurance, and the policy is good for a set term, such as 20 years. When the policy runs out, you get a new policy—usually at a slightly different rate depending on your medical conditions, age, and other factors. Whole life policies have a fixed rate for the entirety of your life, and also accrue cash benefits like an investment account.
Different policies may exclude certain causes of death and some hazardous jobs may not be covered or lead to a costlier policy. Suicide is generally not covered and policies are not available to those who have already been diagnosed with a terminal or life-threatening medical condition.
Is there a minimum age requirement for purchasing life insurance?
The short answer is no. Anyone, of any age, can have a life insurance policy; in fact, experts often advise that you get policies for your children right away. This is difficult for most parents to think about, but in the event of a child’s loss, the life insurance money can make it possible to take time away from work to mourn while covering any unexpected costs.
Those who are in college or are just starting a career may want to consider a policy because their family could end up having to pay back their student loans or other debts. The drawback for parents, of course, is that policies require a monthly payment and for some, getting life insurance is cost-prohibitive in the short term, even though the cost of not having it at all can be extensive later on.
Is there a maximum age restriction for purchasing life insurance?
Most people looking for life insurance are often purchasing a home, getting married, or starting a family. The two biggest factors in determining whether to accept someone for a policy are their age and health. The older you get, the more documentation your insurance company may want to ensure no pre-existing conditions are present. If you want a term life policy, you can usually purchase one up to the age of 85 or so, depending on the company. After that, you may not be able to get a policy very easily, although some companies offer very limited coverage with no medical exams. These policies are generally for the elderly who don’t want their funeral expenses to be a burden on their family. Late-term policies are generally fairly expensive, and only offer limited, smaller amounts of coverage.
Is there an optimal age to purchase life insurance?
There is no optimal age to purchase life insurance. Ideally, your parents started insuring you early while you were still a child, but if you’re now an adult and don’t have a policy, chances are that you need one. The only time life insurance isn’t necessary is if you have the funds available to cover all burial expenses, outstanding debts, and can support any dependents after your death.
Since most people aren’t independently wealthy, life insurance is a must. If you’re in good health and don’t smoke, you can get up to $500,000 coverage for $100-$200 per month. When considering how much to purchase, make sure you also take into account the effect your lost wages will have on family members who are dependent upon you.
Dying prematurely is an uncomfortable subject for many, but it’s important to ensure that your family and obligations are taken care of in the event of your death. The last thing you want to do is leave your family with a stack of bills and no way to pay them. Regardless of your age, the best time to look into life insurance is now.