The younger the better. Simple answer. You don’t need to read anything else.
Ok, so you’re still reading. Life insurance is all about managing risk. What is risk? Roll a dice. You have 1 in 6 chances of getting a 6, or you have 16.6% chance of getting a 6. You have a 20% chance of getting cancer because you live on planet Earth. That means, if you are in a room with 10 people, you know statistically that two of you will get cancer. You just don’t know which 2. That is the risk. More importantly, you don’t know when two of you will get cancer. Don’t make the assumption that only old people get cancer (to continue using this example), Starship hospital in Auckland is full of children who are battling cancer.
- If others depend on your income then you need life insurance
- If you have debt – then you need life insurance.
- The sooner you purchase life insurance, the better – pre-existing conditions
- The sooner you purchase life insurance, the cheaper the cost
Many of you reading this will have a job. Many of us contribute to a household in some way and are responsible for someone else. The money you earn goes to pay for rent, mortgage, food, clothing, cars, school trips, Spotify, Sky Sports, after-school activities, grandma’s groceries, paying off the credit card… Yup, we earn money and the money goes away.
What would happen if you died? That income would stop. That is why you have life insurance. It providers a lump sum to the people you care about. Even if that is only equivalent to a few years of your income, they are a few years where your family can grieve and learn to live and support themselves without you being around.
If you have debt
This is an easy one. Do you want your debt to become your family’s burden just because you went and got yourself killed falling off a ladder? That 10-year-old BMW you like so much, that you’re paying $500 a month for, might be ok while you’re working. But once you’re dead and the income stops, can your family support that?
What about the mortgage? Let’s say your repayments are $2200 a month. If that debt has been paid off by a life insurance policy, your family don’t need to find an extra $2200 to survive. Suddenly their lives (financially at least) may be a little easier because you took out a policy.
Pre-existing health conditions?
The longer you live, the higher the chance of something going wrong with you (remember the dice at the start?) If you get life insurance while you are fit and young, any new conditions will be covered (as long as you stay with the same insurer).
The cost goes up the older you get
Death and taxes, the 2 certainties in life. Insurance premiums rising is another. However, it is possible to fix your premium in the same way you might fix your mortgage payments. There are some fish-hooks to be mindful of, and not all policies are the same. But if you start when you are young, you can save thousands of dollars on your premiums. Yes, thousands! For example, a 30-year-old male non-smoker could save over $14,000 on a $200,000 policy by the time he is 65. That type of saving is worth a look.
The correct time to get life insurance will change from person to person, depending on the circumstances. Basically, you need life insurance if other people depend on your income, or if you have debt that will carry on after your death. After all, you don’t want to leave them without money to live on… or up the creek because of your car loan.