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At which Age should You Buy Life Insurance?

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Many factors affect insurance rates: age, gender, health status, type of insurance, amount of insurance, etc. Be that as it may, when you consider purchasing a life insurance policy, the question that probably comes to your mind first is, “Do I really need it now?” The word “now” signals some emergencies, something that immediately demands your attention. But how old are you now? And why is it better to buy life insurance at this age rather than the other one? Is “age” divorced from other factors when it comes to taking out some plan? If there is a prime age to buy life insurance, what might that be?

First, some recap

Contrary to the lengthy, verbal definition you might read on some insurance websites, life insurance can be understood in a sentence that is less than 20 words. In a nutshell, life insurance will pay your beneficiaries a lump sum if you die. Who can be your beneficiaries? That is not limited to your family members only, but it can be anyone you want to give money to, but this is not a topic we will dwell on today.

To put it simply, there are two main categories of insurance: term life insurance and permanent life insurance. Term life insurance aside, you might’ve heard more about whole life insurance, which is a subcategory of permanent life insurance. The fundamental difference between those two types of insurance is that term life insurance has a fixed timeline and generally low-cost premiums. Whereas permanent life insurance literally means “for life,” with high premiums. As a whole, the older you are, the more expensive upfront premiums will be.

To put things in perspective, suppose you are a non-smoking 25-year-old man with no medical history residing in Kitchener. If you decided to take out a 20-year term life insurance from Industrial – Alliance Life Insurance with the total amount of $200,000, you would only have to pay $16.56/month, or $3974 over 20 years (assuming the premium rates are fixed). On the other hand, If you decided to go with Whole Life Guaranteed Life Pay, the monthly premium ramps up to $97.38/month, or $23,749 over 20 years, which is 6x the premiums of term life insurance. That doesn’t end here, though, as, with permanent life insurance, you will have to pay for premiums for far more than just 20 years. Therefore, we will focus on term life insurance for the rest of the article, as it’s less scary to think about than the other types. To read more on life insurance, you can refer to other articles dedicated to the nitty-gritty details of those types of insurance on our website.

I am young and healthy, so no need for life insurance now

That’s an incorrect premise. What if there is somebody dependent on you? What if you meet the woman of your dreams shortly and want to start a family? Those are just some foods for thought for you to consider. If you currently have no dependents and are not likely in the next few years, term life insurance may not be suitable. 

The most overlooked aspect of choosing to buy life insurance when you are young and in the best shape of your life is that getting insured now guarantees you to be still insured later. What does that mean? Chronic diseases may increase premium rates significantly. Moreover, a terminal illness will disqualify you from buying life insurance. If you get insured now and by some ill chance have some medical condition later, the insurance company cannot terminate your policy contract but has to carry it full-term.

How about me, a married 25-year-old electrical engineer on a decent monthly income?

If you are a man and your wife is currently a stay-at-home mom, life insurance is an absolute must. Your chance of sudden passing, however small, will wreck the financial situation of your family badly. If permanent life insurance looks too outrageous to you, consider term life insurance. “But I’m still a 20 something healthy-looking man, I can buy it ten years later!” We get it. However, continue with the example from the previous section, the difference in monthly premiums you have to pay when you’re 35 vs 25 is just shy $4/month. That’s roughly the price of a Starbucks’s Caffè Americano Misto. And in case you haven’t noticed, since term life insurance’s monthly premium rates are so low, you can rest assured that your other investment plans won’t go astray, be it your retirement fund or a new business venture you’ve decided to embark on.

Speaking of retirement, is there such a thing as too late to take out life insurance?

In theory, the answer is no, although it varies among insurance companies. Certain premiums are an increasing function of age, going more steeply when reaching closer to the age limit. The reason behind that is that the probability of death is an increasing function of age, too. The good news is, if you are under 65, have no serious health problems, and maintain a healthy lifestyle, you can still buy life insurance at a competitive rate. One thing to bear in mind is that after you have passed a certain age, term life insurance and permanent life insurance’s premium rates are mostly the same. Have doubt? Unsure about which type of life insurance to choose? Our insurance experts at Insurance Direct Canada can give you advice for free today.

The bottom line

Permanent life insurance does not seem rational at all when you are young. But if you want to offer your loved ones the best financial protection possible, you should consider (term) life insurance today. It’s a fact that you can’t predict the future. The risk of delaying taking out life insurance and unfortunate events are not worth saving twenty bucks a month. Remember, you are getting insurance to ensure you can still be insured for an extended time even after you get a disability. So, don’t miss your chance.

Frequently Asked Questions

How does Age influence life insurance premiums?

Like other insurance products, many variables determine premiums for an individual life insurance policy. That said, if you are looking for life insurance, the combination of your age, gender, smoking habits (or the lack thereof), and health status will affect premiums the most. For example, someone who has no medical history, and does not smoke will pay significantly less in premiums than the one who smokes two packs a day and is on insulin for their type 2 diabetes.
However, with regards to age, it is helpful to zoom out on the effect of age over premiums a little. Generally speaking (Note: This does not necessarily speak for all insurers), for people who are under forties and healthy, premiums do not ramp up much over the years. If you are 20 years old and decided to get life insurance five years later, there would not be too much fluctuation between the premiums. Once you are over the age of 40, premiums will increase more steeply as you age.

Should I get life insurance as young as possible?

Assuming that you have a valid reason to buy life insurance, then yes. For a healthy 20-year-old non-smoker from Ontario, a 20-year term policy of $500,000 would have monthly premiums starting from $30. That is barely twice the monthly subscription of Netflix Premium and three times a monthly Spotify Premium.
Here is a scenario: You delayed getting life insurance, brushing it aside as a non-essential need. Now you are at an age that is starting to make it a lot harder to purchase policies from scratch. In addition, your health is in decline, though only slightly. Premiums are sky-high, and health requirements seem almost impossible to meet.
If you could go back in time, what would you have done differently? The answer is to insure yourself with a term policy early. More importantly, make sure that the policy is either renewable or convertible or both. That way, you will not need to care about life insurance eligibility again when your policy expires since you will be automatically signed up for another policy of your choice.

Is there a maximum age to buy life insurance?

If you are anything like me when I first heard about life insurance, you would think there is an upper age limit for life insurance. After all, selling a whole life insurance product to an 81-year-old does not make much business sense at the outset. And yet, there is no consensus among insurance companies on maximum age.
Here, age is a function of the type of life insurance. Surveying the eligibility for term life insurance across most popular insurance providers, we found that the upper age ranges from 50 to 65. For whole life insurance, the maximum age ranges from 75 to 85, with the insured age going up to 120. Consequently, although there is not a single number defining the upper age limit for buying life insurance, you should still research the age requirements thoroughly to avoid when it is “too late.”

Is there a minimum age to buy life insurance?

Like the above section, there are no minimum age requirements to purchase life insurance. Regarding term life insurance, insurance companies often set the lower age limit to 18 or 20, which is the age range when people start becoming independent and can pay for their premiums. Some insurers even provide term life insurance policies for teenagers who are between 15 and 17 years old. If your children are not old enough to buy their policies, you can purchase the policies for yourself and transfer the right to insure your children when they are of age.

Does there exist a prime age for life insurance purchasing?

What is considered “prime” is going to vary from person to person. However, we can all agree that we want to hit that sweet spot of paying the least amount of premiums while having a good enough policy that is convertible or renewable in the future. Therefore, it is advisable to think about life insurance as soon as possible, so you are not missing out on anything an earlier buy will guarantee you.

Life insurance might be what I need in the future; should I still consider buying it now?

Ask yourself this question first, “What risk do I want to mitigate when buying life insurance?” Once you are in the clear, you would be more well-informed to decide before. Are you having people depending on you? The sooner you get on a life insurance policy, the earlier you will have to worry less about what may go haywire in the future. Just married and planning to make a downpayment for a condo in the next neighborhood? You can get insured now as part of the strategy to protect both your spouse and the mortgage down the line.

My parents are over 60 years old and have never bought life insurance. How can I convince them they need life insurance?

Your first step is to head over to the Explore Topics section on our website. We have gathered extensive information on numerous topics on life insurance. You can also compile stories about the elders getting life insurance, emphasizing the benefits of getting one. Please make sure they can see that the benefits far outweigh the cost. Should your parents still be not convinced after you have presented them your best evidence/arguments, here is a possible last resort: Consider insuring yourself with some policy designating your parents as face amount receivers. Unfortunately, it is impossible to take out a life insurance policy on someone else without their explicit permission.

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