Life is full of uncertainties. Right savings done at the right time can help you meet emergency expenses and unforeseen circumstances. Life Insurance is one of the best ways to plan your life savings as well as securing your life and that of your loved ones. But how would you determine when is the right time to invest in a life insurance policy? Is it when you have just started earning, before you get married or after you have kids?
The market is flooded with different types of policies with different implications and terms, each of them promising a secure future and ample savings. What matters is to select a policy at a right age in such a way that it reaps the maximum returns at the time when you need it the most.
Though there is no predetermined or the right age to purchase a life insurance, factors like income, dependents or future plans can guide you in making a correct investment decision. Depending on the age, one needs to decide how much is needed, how long is it needed or whether a term or a guaranteed policy is better for them.
We will take a quick look at the different ages and factors to consider while buying a life insurance.
20’s
During the 20s, life insurance is easy to get and is inexpensive because the life insurance company takes into account that you will be able to pay premiums for a number of years. Statistically, there is relatively little risk that they might have to pay out, whereas the risk goes higher with age. Also, at this stage, people have just started their professional life, are relatively debt free and plan to build their savings. So, you have more income at disposal to buy a life insurance. Moreover, you have quite a many life insurance policy options open to you. Buying a life insurance in early 20’s can help you pay off student loans or support your family financially sooner. For people with no children or large capital back up, it is better to choose a policy of at least four times their annual income. Whereas those with spouse, children or other dependents may need to account for the factors like additional household income and other parallel debts.
30’s
During this stage, people are more likely to have kids and family. Income goes higher, but so does the need to safeguard your assets and secure your family. Sometimes, a second policy is taken by many to add to the investment portfolio. For first time policy buyers, home and other larger debts and most importantly, family needs should be taken into consideration. The thumb rule is to opt for policies ten times your annual income to account for kids and assets. Also working and stay-at-home parents need to be considered such that it should cover childcare and other home services in case anything happens to the stay-at-home parents.
40’s
In your 40s, factors such as higher education of children, care of old parents or retirement planning float higher on your investment scenario. Hence, it is better not to opt for a term policy which might run out while your children are still dependent on you or you are yet to pay off your mortgage. Hence a permanent insurance policy for financial protection and cash accumulation is more suitable for this age. It is also a good time to invest in health policies for yourself and family.
50’s
This is a period, when you may really not need a policy as your children may be already out of your shelter and you have paid off most of your debts. However, if you are planning to set up an inheritance for the kids, funding a trust or building up a liquid asset, you may want to tap into the benefits of permanent life insurance policy. But you must remember, that buying a life insurance at this age is not only expensive, but also difficult due to your health risks associated with your age.
60’s
Ah, the 60s! Time to enjoy a carefree life, isn’t it? At this stage, you are hardly to have any dependents. So, rather than a new investment, you should probably can take a look at your existing policies for possible returns and closure. Purchasing any policy beyond 65 is likely to serve no purpose, would be heavily expensive and companies would be reluctant to sell. However, with advancement in medical and health care facilities, life expectancy has increased and hence, you may still want to consider taking a life insurance.
The decision to invest in a life insurance policy actually depends on the need of the person , rather than his age. However, if you are considering buying one, it is advisable to buy at least one policy at an early age to optimize its benefits in the long run. You can add more policies to your insurance portfolio later in the life, as per your requirements.
This is really a very useful article to read.
Moreover age brackets I think one have to consider the liability factor as main criteria. If someone got married or family responsibility by the age 20-23 years then he or she should by a pure term insurance plan to secure family’s future expenses.