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When should you buy life insurance?

Life insurance policy
Milestones like getting married or having children can be a good time to assess when you need life insurance. Getty Images

If you want to provide a financial safety net for those who depend on you in the event of your death, then life insurance can help.

In exchange for regular payments made over time to an insurance company or through an employer, people you designate as beneficiaries get an agreed-upon sum when you die through your life insurance policy.

There are two main kinds of life insurance, offered in a variety of forms: term life insurance and permanent life insurance. The most common kind of permanent insurance is called whole life insurance. Term life insurance offers coverage for a set period of years. Permanent, or cash value, covers your entire lifetime (premiums can cost more).

Either form of life insurance will provide financial protection for you and your loved ones. So, if you don't have life insurance, or want to supplement what you currently have, it's worth exploring your options. Get started with a price estimate today.

The type of insurance you purchase will depend on your personal financial situation. Term life insurance, for example, is applicable to certain time frames, or terms, of the insured's life. It's often cheaper than other insurance types but it will need to be renewed when the term expires. Whole life insurance, meantime, is more expensive but it lasts for the duration of the policyholder's life. It also has a desirable cash-out option. There are also universal, variable and no-exam life insurance policies to choose from.

But when is a good time to actually buy life insurance? In general, experts say the earlier the better - but it also pays to examine your specific needs like dependents and individual financial situation. Consider your whole financial picture and future needs.

As usual with personal financial decisions, there are advantages and disadvantages to consider. This is especially true when determining the time frame for purchasing life insurance.

Buying life insurance at a younger age means

  • Monthly premiums are generally less expensive
  • You have time to build more cash value in a whole life policy
  • Expenses like mortgage payments can be covered if you die unexpectedly
  • A spouse, partner, children or business partner that depends on your income for everyday costs won't be left in a lurch 
  • The payout can cover expenses and debts you leave behind

It's never a bad idea to at least look into life insurance, even if you haven't thought about it before (or couldn't yet afford it). 

You may have dependents, bills and other expenses you still need covered. Or, you may want to leave an inheritance. There are multiple advantages to having a life insurance policy in place, regardless of the type you choose. Speak to an insurer today who can help guide you to the right choice. 

Buying life insurance at an older age means

  • You'll pay more in monthly premiums
  • You won't have as long to build cash value if you choose a whole life policy, and less to cash out if you need to liquidate that policy sooner
  • You may have fewer good policy choices
  • You may be able to cover certain outstanding debts
  • You can still leave part of the benefit as an inheritance
  • The payout can still help your dependents or partner cover expenses

Certain milestones can also be a good time to consider life insurance:

  • When you land your first job. Some employers offer policies as a benefit. 
  • When you get married. Your spouse will have funds to cover lost income.
  • When you start a family. Your children, spouse or partner may count on your income for everyday expenses. Shopping for a life insurance policy now can help cover those expenses for generally lower monthly premiums.
  • When you buy a home. If you have a mortgage, it can be a good idea to buy life insurance to help beneficiaries keep up payments after your death.

Have additional questions about purchasing life insurance? Talk with a financial adviser to properly assess what's right for you.

How to pick your beneficiaries

The timing of your life insurance purchase will be influenced by all the factors listed above. Who you ultimately list as your beneficiaries will also be affected by timing - specifically, the goals you had at the time the policy was purchased. 

There are a series of tips to help you pick the right beneficiaries. Here are two of the critical ones:

  1. Go back to the basics: When you get insured for a significant sum it can be tempting to list a variety of people as beneficiaries. But keep the people you purchased it for at the top of your mind. Is this policy primarily to support your children after you have died? Then they should be on top. If you want to leave it to your spouse to make up for lost income in your absence then they should be listed first. When it comes to listing life insurance beneficiaries sometimes the most obvious choice is typically also the right one.
  2. Be careful listing minors: You can list beneficiaries under the age of 18. Just be aware that they may have an arduous legal process to go through in order to obtain the funds. Restrictions on how much money minors can access via a life insurance policy vary from state to state. You may be better off instead listing a trusted adult as the primary beneficiary to avoid this. You can always adjust it when the minors reach legal age.

Have more questions? Not sure how you should structure your beneficiaries? Reach out to a life insurance expert who can help.

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