When it comes to life insurance, one of the main questions that consumers contend with is when is the right time to purchase? In order to answer this question, it is important to first understand what life insurance is.
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The term “life insurance” is actually rather self-explanatory. It is a form of insurance that is paid out upon the death of the insured party. Some contracts may vary, and the insurance may actually be paid out prior to death if the insured person has a terminal illness.
Typically, the old school thought process on life insurance was that it would go to help support a family in the event of a death. Thus, having one’s own family became one of the defining moments when a person made the decision to purchase life insurance. However, the need for life insurance is not limited to whether or not you have family.
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That Was Then, This Is Now
Historically, once we had settled into our careers, married and started a family it was time to think about purchasing life insurance. The purpose of life insurance was to help cover expenses that the person who was insured would otherwise be able to manage themselves because they were working.
Usually, in a nuclear family, one or both of the parents would be the ones to purchase the life insurance to help ensure the spouse and their child or children would face less of a financial burden if one or both parents passed away. This notion is still the case today.
Given that in most two parent households, both parents work in order to sustain the family, in the event of one parent’s death the money from the life insurance policy would help the family survive by replacing the dead parent’s income. In this case, the time to purchase life insurance is around the birth of your first child..
Another time to think about purchasing life insurance is at the time of another big purchase – a home. Taking on a mortgage is a big responsibility and if the homeowner were to pass away, life insurance could ensure that the debt would be covered. This is true for a person who buys the house with another person but the other person can’t cover the mortgage with just his or her salary. But it’s also true for a single person who doesn’t want to put whoever inherits the house in the position where they have to sell immediately to pay off the mortgage.
Related: How Much House Can I Afford?
The Future Is Sooner Than You’d Think
While having a family was one main reason to purchase life insurance, our age can also be a factor on when is the right time to buy. We tend to be at our healthiest when we are younger, in our twenties to mid-thirties.
The older we get, and the more the aging process starts to take its toll, the more at risk we are for more severe illnesses. These factors tend to have an impact on the cost of purchasing life insurance. The older we are when we try to purchase life insurance, the more costly it will be. Therefore, even if you do not have a family, but have started a career and are living on your own, and are in relatively good health, it may be time to start thinking about purchasing life insurance. When you are at your peak health and fitness levels, it is likely more beneficial in terms of cost to purchase life insurance.
Life insurance is a big step, and one we tend to think of as something that we need to think about far off in the future. However, if you are working and building your financial nest egg, life insurance should, at least, be on your list of things to consider.
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