When Should You Get Life Insurance?

If you've been considering a life insurance policy but keep putting it off, this article is for you. While the circumstances and needs of each person differ, more often than not, it is beneficial to obtain a life insurance policy sooner rather than later. This article will walk you through what life insurance is, why you might need it, what kind of coverage you should consider getting, and of course, when you should get life insurance.

What Is Life Insurance?

A life insurance policy provides a payment, known as a death benefit, to the policyholder's designated beneficiaries upon the death of the policyholder. It is designed to help cover expenses such as funeral costs, outstanding debts, and future financial needs of the deceased's dependents, offering them financial security and enhanced peace of mind.

Policyholders typically pay regular premiums to maintain their life insurance coverage, and the amount of the death benefit can vary based on the particular policy's terms. Life insurance can be an essential part of a comprehensive financial plan, helping to ensure that loved ones are financially protected in the event of an unexpected death.

Who Needs Life Insurance?

At some point in their lives, many individuals may be faced with this question: "Should I get life insurance?" While for some it may be highly recommended, obtaining a life insurance policy is a personal choice. Not everyone may need or want a policy, but it does help provide financial security for dependents after you’re gone.

Some reasons you might want to consider life insurance include:

To pay for funeral costs. It may surprise you to learn that funeral costs and expenses can add up to quite a bit of money. Funeral services, burial costs, casket, and other fees can quickly rack up. In the event of your death, you may not want to leave your family with extensive funeral costs that they may not otherwise be able to afford.

To leave a financial legacy. Life insurance can act as a form of inheritance to leave to your children, partner or dependents after your death and can be viewed as a significant accomplishment. Some people may even choose to donate their life insurance death benefit to a charity or other type of organization.

Financial protection of your small business. Small business owners may have concerns about how payroll and other operational expenses may be paid after they have passed. The death benefits may be used to help the business meet those obligations.

Replace lost income. Many households survive on two incomes, so if one is suddenly gone, it can cause financial hardship. A life insurance policy helps ensure that your home and family are cared for as they adjust.

Investment versatility. Depending on the type of life insurance policy you obtain, you may be eligible for a cash value component that grows tax-free and can be invested into stocks, bonds, and other vehicles that can benefit you later.

These are just some of the scenarios where a life insurance policy may be useful. If you have people depending on you financially, life insurance can be a worthwhile investment. For some, life insurance may offer greater security for loved ones, but even if you don't have children or dependents, you may still reap other benefits from obtaining  a life insurance policy.

Types of Life Insurance

Two of the most common life insurance types are term life insurance and permanent life insurance. Within permanent life insurance, there are several options such as whole, universal, and variable life insurance policies. Term life insurance is a policy that provides coverage for for a determined period of time. Term life insurance is typically more affordable, while permanent life insurance typically costs as it offers long-term coverage. Here is a more thorough breakdown.

Term Life Insurance

Term life insurance is a policy that provides coverage for a specific term or time period, usually a set number of years such as 5, 15, or 30 years. For term life insurance, your premium rate and death benefit amount are locked in for the term selected; however, if the policyholder outlives the term, the coverage ends unless the policy is renewed or converted into a whole life insurance policy. Beneficiaries only receive a death benefit if the policyholder passes away during the term.

Permanent Life Insurance

There are three common types of permanent life insurance policies, which vary in rates, funds, flexibility, and more.

Whole life insurance: A whole life insurance policy can offer a fixed premium, fixed death benefit, and a guaranteed cash value. This policy type typically stays effective as long as the policyholder pays the required premiums. Additionally, whole life insurance policies may provide the potential for dividend payments or participation in the insurance company's investment portfolio.

Universal life insurance: A universal life insurance policy combines a death benefit with a savings component, offering policyholders flexibility in premium payments and death benefits. The savings element of the policy earns interest based on either market rates or a fixed rate, and it grows on a tax-deferred basis. Policyholders can adjust their monthly premiums and the amount of the death benefit according to their changing financial situations and needs over time.

Variable life insurance: Variable life insurance not only provides a death benefit to beneficiaries upon the policyholder's death but also includes a cash value component that can be invested in various investment options such as stocks, bonds, and mutual funds. This investment component allows the cash value to potentially grow based on the performance of the chosen investments. However, it also introduces the risk of the cash value decreasing if the investments do not perform well. Variable life insurance policies generally have fixed premium payments.

When to Get Life Insurance

So, when should you get life insurance? Is there a "right" time? While there's no cutoff or specific age at which you must purchase a life insurance policy, there are certain times in an individual’s life when it may make sense. Many consider obtaining a life insurance policy after a major life event, such as:

• After marriage
• After having children
• After buying a home
• After starting a business

It may be a good idea to consider obtaining a life insurance policy early in life when you may be at your healthiest. You may qualify for better rates and benefits if you can purchase a life insurance policy while young and in good shape.  This timing can be tricky, however, as younger people may have other financial obligations, such as paying off student loans, getting mortgages, making car payments, etc.

With term life insurance, you may choose to strategically account for when you'll have dependents relying on your income. It's always wise to consider the big events in your life and the phase of life you are in before getting a policy.

The Cost of Waiting

Life insurance policy premiums are typically lower for those who obtain a policy at a younger age. For example, an individual who obtains a life insurance policy at 25 years old may pay less in premiums than one who obtains a policy at 50-year-old. One of the reasons is the belief that people tend to develop greater health risks with age. Note, however, that each individual’s specific circumstances will vary and the application process will depend on factors other the policyholder’s age.

How to Buy Life Insurance

Here are some of the typical steps involved to help you better understand the process of obtaining a life insurance policy:

Decide what amount you think you will need. Before exploring different policy types, determine the benefit amount you would need to feel satisfied and who you would include on your policy as a beneficiary. What does your income cover right now and how would the loss of that income impact your loved ones? This will help you determine how much coverage you need to purchase.

Get quotes from different life insurance providers. You may want to research different insurance providers to find the best fit. Not every insurance company offers the same premiums and coverage options.

Follow the insurance provider's application steps. Most life insurance companies require a medical exam and details about your health history since this can directly impact your premiums. Always be forthcoming on an application.

Deep dive into any life insurance policy you accept. Each policy will have terms, conditions and exclusions. Remember to read the policy carefully so that you fully understand the coverage and any potential exclusions or limitations on your policy.

When your application is processed and approved, the insurance company should advise you of the effective date.

Ready to Research Life Insurance Policy Options?

Securing a life insurance policy can be the right option for many people and, if you're thinking about getting a policy, the best time could be right now. Consider your current financial situation, future goals and needs of your loved ones and dependents so you can make sound decisions for your future.

Acrisure empowers people to make the right decisions about their life insurance policy needs. With technology that helps pair you with the right insurance provider, Acrisure can help you find the solutions that will serve you best.

Contact us today to get started and learn more about your life insurance options, or request a term life insurance quote online now.