Life insurance while you’re young
Posted in General Topics last updated on August 26, 2020
Buying life insurance while you’re young and healthy might not be at the top of your list, but maybe it should be. You might not have anyone depending on you at this point in your life and think there’s no need for it. For most of us, that changes before we know it. Suddenly, you meet the right person and decide to start a life together. That might involve just the two of you and a home, or perhaps kids, pets, a small business…
You have a lot to gain by putting a life insurance policy in place before you think you “need it”. Rates are at their lowest for young, healthy people. In addition to cost, getting approved is much easier for young adults and more options are available to you, such as no medical exam policies.
Benefits of buying life insurance when young & healthy:
- Lowest rate of your life
- Lock in low rates for the long haul
- Option to build cash value over decades
- Possibility to convert to permanent coverage without a new medical exam
- Change the purpose over time
Lowest rate of your life
I’m sure you’ve gathered by now that life insurance companies favor the young and healthy. When you’re in your 20s & 30s, life insurance can be downright cheap. Every birthday and every health condition you may develop over time will cause your rates to go up. Certain conditions may actually render you ineligible for coverage altogether.
Here are examples of how $500,000 in coverage breaks down for men & women in their 20s, 30s & 40s. These are based on individuals living in Texas, but the numbers would be similar in most states. The health conditions used for demonstration purposes are based on real world cases I work on a daily basis.
It’s easy for us to feel invincible in our 20s & 30s (and hopefully beyond), but the reality is that nobody knows if & when they might develop a health condition. Combine that with higher rates required just by being a couple of decades older and suddenly the cost of life insurance can become cost prohibitive for many of us.
| 20 Years old | 30 years old | 40 years old |
| Male|5’8″|175lbs Excellent health 30 year term $500K death benefit $30.78/month | Male|5’8″|175lbs Excellent health 30 year term $500K death benefit $32.18/month | Male|5’8″|175lbs High blood pressure High cholesterol 30 year term $500K death benefit $99.26/month |
Female|5’3″|125lbs Excellent Health 30 year term $500K death benefit $24.51/month | Female|5’3″|125lbs Excellent Health 30 year term $500K death benefit $27.10/month | Female|5’3″|160lbs Type 2 Diabetes 30 year term $500K death benefit $76.90/month |
Male|6’1″|190lbs Excellent health UL to age 90 $500K death benefit $127.58/month | Male|6’1″|190lbs Excellent health UL to age 90 $500K death benefit $193.00/month | Male|6’1″|225lbs High blood pressure High cholesterol Arrhythmia UL to age 90 $500K death benefit $421.08/month |
Female|5’8″|145lbs Excellent health UL to age 90 $500K death benefit $101.30/month | Female|5’8″|145lbs Excellent health UL to age 90 $500k death benefit $152.45/month | Female|5’8″|170lbs High blood pressure Rheumatoid arthritis UL to age 90 $500k death benefit $355.01/month |
* The figures are for illustration purposes only. When it comes to life insurance, everyone’s price (premium) is tailored to his/her specific health profile and lifestyle. Contact me for customized quotes. *
Lock in low rates for the long haul
Whether you’re considering a term policy for up to 30 years, or permanent coverage in the form of universal life or whole life, locking in the low rates that you’re currently eligible for has substantial advantages. Most everything in your life will increase in cost as the years advance.
Ever look at retail prices of some of the coolest cars from the 50s & 60s? New Cadillacs were in the $5,000s in 1960. You can’t find a decent 5-10 year old used mid-class car today for the price of a new Cadillac in the 1960s! Don’t get me started on the cost of buying a house.
As the cost of goods & services continue to increase, locking in low rates on a quality life insurance policy has distinct advantages. Of course, this is closely related to my previous point. Buying life insurance when you’re young just makes good financial sense.
Option to build cash value over decades
If you opt for permanent coverage, not only will you be able to lock in lower premiums, but you’ll also be building cash value over time. Both whole life and universal life will build cash value, but under different mechanisms (that are outside the scope of this article). Like any investment vehicle, this has a compounding effect, so starting early means that your policy could have significant value into your 40s, 50s and beyond.
You can use this cash value in various ways. It can be borrowed against to fund a business, pay for your kids’ education, a home remodel, etc. You can even apply some of the cash value towards your premium with certain policies, thus removing the need to make payments for a certain period.
Keep in mind, however, that accessing the cash value of an insurance policy has repercussions. In some cases, such as surrendering a policy for it’s cash value, it can be considered a taxable event. Any monies taken out of the cash value while keeping the policy in force will reduce the death benefit by that amount or shorten the duration of coverage, until repaid into the policy.
Possibility to convert to permanent coverage without a new medical exam
Many term life policies offer the option to convert into permanent coverage. Either to a whole life or a universal life policy. You typically have a window of time in which the policy is convertible. The first 20 years or until age 70 are common examples.
You stand to benefit the most with conversion if your policy does not require a new medical exam. You’re basically grandfathered into the same rate class for the new policy you’re converting into. Most convertible term policies won’t require a new exam, but you should verify when considering your options. I highly recommend a term policy with this provision. You just never know what your health will be in 10/15/20 years.
Being eligible for the same risk class you were in your 20s & 30s is usually going to save you a lot of money if you decide you want/need permanent coverage.
Change the purpose over time
For most 20 or 30-somethings, life insurance is planning for a future that is still a work in progress. Not that any of us can predict the future, but when you’re early in your career you’re in a place when things can develop in different directions. Today, your career or business might be your main focus and you believe that kids and/or marriage are probably not going to enter the picture. Fast forward a few years and you meet the right person and your path shifts exactly in that direction. Suddenly, you’re starting a family.
It’s easy to change how you want to use your coverage. Who you want to protect, in other words. At the outset, your death benefit might allow your parents or siblings to cover your final expenses and other debts, especially if a family member has cosigned for any loans. Once you start a family, that protection will shift to help your new family with mortgage/rent, kids’ education, day-to-day expenses, etc. if you were suddenly not around.
You can easily change beneficiaries as your needs evolve.
How do I get started?
You can either click the Request a Quote button below and complete a quick form or send me an email to start the conversation. During a free consult, I’ll gather information about your health and lifestyle. That allows me to pre-qualify you so that I can look at the right options. That means carriers that will look at your application in the most favorable light. Your unique level of risk will be considered differently against each insurance company’s underwriting guidelines. You’ll improve your odds of approval by applying with the company who’s the best fit for your unique situation.
My ultimate goal as an independent life insurance broker is to help my clients obtain the right coverage. Not only at the best price available, but with the appropriate insurance company for their situation and level of risk. I will never suggest that you apply for the cheapest option if I believe that for one reason or another you will not qualify for that specific insurance policy.
Life insurance is by no means a one size fits all purchase. Reach out today and let’s discuss your options!
-Danny GallantLife
Insurance Broker
512-922-1273
