Life Insurance Before Age
Millennials have good
reasons to obtain coverage now.
Provided by MidAmerica Financial Resources
Do you plan to buy life insurance before you turn 40? Maybe
you should. You may save money in the long run by doing so.
At first thought, the idea of purchasing a life
insurance policy in your thirties may seem silly. After all, young adults are
now marrying and starting families later in life than past generations did, and
you and your peers are likely in excellent health with a good chance of living
In fact, LIMRA – a life insurance research and
advocacy group – recently surveyed millennials and found that 30% thought
saving for a vacation mattered more than buying life insurance coverage. The
perception seems to be that insurance is something to purchase when you start a
family or when you hit your forties or fifties.1
Getting a policy before you marry or start a family may be a great
idea. The reasons for doing so might be compelling.
Your premiums will be lower. The older you become, the more expensive life
insurance becomes. Data compiled last summer by Life Happens, a non-profit life
insurance education effort, confirms this.
Life Happens asked several prominent U.S.
insurers to supply their preferred premium rates for healthy non-smokers aged
25, 35, 45, and 55 buying a $250,000 whole life policy (the kind designed to
build cash value with time). The average preferred premium rates for 25-, 35-,
and 45-year-olds fitting this description were:
male: annual premium of $1,987
male: annual premium of $2,964
male: annual premium of $4,747
female: annual premium of $1,745
female: annual premium of $2,531
female: annual premium of $3,947
The numbers starkly express the truth – whole
life insurance premiums more than double between age 25 and age 45.2
Premiums on term life policies are even lower.
Term life insurance is essentially coverage that you “rent” for 10, 20, or 30
years – it cannot build any cash value, but in some cases, a term policy can be
adapted or exchanged for a whole life policy when the term of coverage ends.
If you are young, term coverage is remarkably
cheap. NerdWallet recently researched term life premiums for healthy
30-year-olds. It found the following sample rates for 20- and 30-year term
policies valued at $250,000:
male: annual premium of $156 for a
20-year term policy, $240 for a
30-year term policy
female: annual premium of $141 for a
20-year term policy, $206 for a
30-year term policy
The downside of term coverage is that you are
“renting” the insurance. Just as you cannot build home equity by renting a
house, you cannot build cash value by “renting” a policy.3
A whole life policy may become quite valuable. As
Life Happens notes, the average such policy bought at 25, 35, or 45 may have a
guaranteed cash value of anywhere from $100,000-200,000 when the policyholder
turns 65, assuming the policy is kept in force and no loans are taken from it.
Universal life policies permit tax-deferred growth of the cash value.1,2
Make no mistake, a whole life policy is a
lifelong commitment. It must be funded every year or it will lapse. That should
not scare you away from the value and utility of these policies – the cash
inside the policy can often be borrowed or withdrawn. Sometimes families use
cash value to fund college educations or help with medical expenses or
retirement. Such withdrawals can lessen the death benefit of the policy, but
what is left is often adequate. Cash withdrawals from a whole life policy are
usually exempt from taxes, just like the death benefit.1
is the time to put time on your side. Age-wise, life insurance will never be cheaper
than it is for you today. Getting coverage now – even if you are single – may
be a money-smart move as well as a great life decision.
MidAmerica Financial Resources may be reached
at 618.548.4777 or email@example.com.
This material was prepared by MarketingPro, Inc., and does not
necessarily represent the views of the presenting party, nor their affiliates.
This information has been derived from sources believed to be accurate. Please
note - investing involves risk, and past performance is no guarantee of future
results. The publisher is not engaged in rendering legal, accounting or other
professional services. If assistance is needed, the reader is advised to engage
the services of a competent professional. This information should not be
construed as investment, tax or legal advice and may not be relied on for the
purpose of avoiding any Federal tax penalty. This is neither a solicitation nor
recommendation to purchase or sell any investment or insurance product or
service, and should not be relied upon as such. All indices are unmanaged and
are not illustrative of any particular investment.
and advisory services offered through National Planning Corporation (NPC),
Member FINRA/SIPC, a Registered Investment Adviser.
MidAmerica Financial Resources and Malan Financial Group are separate and
unrelated companies to NPC.
1 - cnbc.com/2016/10/17/think-about-life-insurance-sooner-rather-than-later.html
3 - nerdwallet.com/life-insurance#basic [1/26/17]