Although two-thirds (66 percent) of Americans recognize they need life insurance, 57 percent say they actually have it.1 One reason people cite for not having it is that they feel like it’s complicated, but life insurance is nothing more than a contract between you and the insurance company. You pay them the premiums, and in return, the insurance company pays the death benefit (if payable according to the terms of the policy) you selected to the person you designated to receive it (your beneficiary). The concept is really quite simple: life insurance exists as a way to help protect our loved ones from the financial devastation that can occur when an income earner is no longer here. It can also be considered an important part of the foundation of a long-term financial plan.
When is the best time to buy life insurance?
Another reason cited by 17 percent of Americans for putting off buying life insurance is that they are convinced they don’t need it.2 So, they procrastinate until they think they need it, but may be uncertain when that might be. After all, when you’re young, single, and debt free, buying life insurance can seem like a decision that’s a long way down the road.
Make no mistake: the best time to buy life insurance is always now because it will never be cheaper than it is right now. Why? Two factors that determine the cost of life insurance are your age and the state of your health. We’re all getting older, and good health is not guaranteed to any of us in the future. If you wait, life insurance will be more expensive, and depending on your health, you may not be able to qualify for it.
Waiting for a sign?
If you’re a single, college graduate with a Bachelor’s degree, you may be like two-thirds of the class of 2019, who graduated with an average of $29,900 in federal and private student loans.3 When asked how long they believed it would take to pay off their school loans, the average answer was six years; in reality, it will take closer to 20 years.4 If you co-signed your student loans with your parents, this financial obligation could have an impact on your parents’ financial wellbeing. Here’s your sign: I’ve got this, Mom & Dad!
If you’re married, it’s likely you have picked up additional debt along the way.
- Are you among the more than 17 million people who bought a vehicle in 2019?5 The average price of a new car is more than $36,000, and a used car costs more than $20,000 on average.6
- Do you own your home? Home prices vary greatly depending on where you live, but the median price for a home in 2020 is $274,600.7
- Forty-seven percent of Americans carry credit card debt.8 The average American holds four credit cards with a total balance of $6,200.9 As many as 40 percent of those with credit card debt say they can’t afford to pay more than the minimum payment each month.8 Are you among them?
Outstanding medical bills, and business or personal loans are two examples of other common types of debt you may also be carrying, and let’s not forget about any lingering debt your spouse may have brought into the marriage. Here’s your sign: For Better or Worse.
Congratulations, you’re planning a family! If you have made it this far down the road of life and have somehow missed the other sign posts along the way, you aren’t alone. Waiting for the arrival of children into a family is one of the excuses people make for not buying it sooner.2 For them, this is when the need becomes undeniable … at least for the main income earner.
The truth is that BOTH parents need life insurance. If you both work outside the home, and either one of you were to lose the other’s income, it could mean financial insecurity for the survivor, who would now be responsible for the final expenses plus paying the mortgage, maintaining the household’s standard of living, and planning for the children’s education. The same also holds true even if one spouse doesn’t work outside the home. If that spouse were to die, not only would the survivor be responsible for the aforementioned needs, but it would also fall upon the surviving spouse to find other people to perform the tasks the stay-at-home partner typically performed: housekeeping, child care, transportation, etc.
When you consider that on average, middle-income parents will spend $284,570 per child by the time a child turns 18 — not counting a college education10 — the need for life insurance to help protect the financial wellbeing of your loved ones becomes crystal clear. Here’s your sign: Baby on Board
Whether or not you have reached the stage in life when you are planning a family, please consider heeding the signs along the way to consider purchasing life insurance, regardless of where you are in life. Keep in mind that it will never be cheaper than it is today. A licensed insurance professional can help you choose life insurance coverage that fits your needs and your budget.
- Life Happens, 2019 Insurance Barometer Study: Nearly Half of Americans More Likely to Buy Simplified Underwritten Life Insurance (July 30, 2020)
- The Motley Fool, 6 Reasons Americans Don't Have Life Insurance, and Why They're All Bogus (July 30, 2020)
- Savingforcollege.com, Average Student Loan Debt at Graduation (July 30, 2020)
- CNBC, College grads expect to pay off student debt in 6 years—this is how long it will actually take (July 30, 2020)
- CNBC, US auto sales fall in 2019 but still top 17 million for fifth consecutive year (July 30, 2020)
- U.S. News, Average Auto Loan Rates in July 2020 (July 17, 2020)
- USA Today, Despite coronavirus, low supply and high demand buoyed first-quarter home prices (July 17, 2020)
- CNBC, Almost half of America is now carrying credit card debt, and more of it (July 17, 2020)
- USA Today, Here's a top reason Americans are carrying an average credit card balance of over $6,200 (July 17, 2020)
- Investopedia,The Cost of Raising a Child in America (July 31, 2020)
Categories: Life Insurance, Term Insurance, Whole Life Insurance