When Should You Buy Life Insurance?

When Should You Buy Life Insurance? article image.

Life insurance can protect your family from financial hardships that may occur after you pass away. Even if you expect to have many years ahead of you, it's best to buy life insurance when you're young and healthy, as premiums tend to be more affordable. The amount of coverage that's right for your situation depends on several factors—if you decide you need coverage at all.

Read on to learn how to determine if you need life insurance, what to consider before you purchase a policy and why life insurance is usually worth it.

What Is the Best Age to Get Life Insurance?

There is no right or wrong age to get life insurance. However, life insurance premiums are usually cheaper if you're young and in good health. A policy might not be necessary if you're a healthy, single 20- or 30-something with no dependents (or others you want to leave money to) and enough assets to cover your debt if you pass away.

But if you have outstanding debt and few assets, life insurance proceeds can be used to pay lenders and creditors. It's also wise to get life insurance if you have dependents, a spouse or both and the loss of your income would be detrimental to your family's overall financial health.

What to Consider When Buying Life Insurance

Shopping for life insurance doesn't have to be overwhelming. When you're ready to purchase coverage, consider these factors:

  • Your family's financial needs: How much financial assistance will your spouse and dependents need if you pass away? Think about your household financial obligations and debts that wouldn't be covered without your income. Also, factor in your funeral and burial expenses and any other costs you would want covered, like college tuition or wedding expenses for your children. Subtract this figure from your total assets to reach a ballpark figure.
  • Monthly premium: Review your household budget to determine how much you can afford to pay for premiums. If you don't have a budget, use this guide to help you get started. Keep in mind that most insurance providers give you the option to pay monthly or annually—the latter could get you a discount on premiums.
  • Type of life insurance: Decide whether you prefer a whole, term or universal life policy. Whole life and universal life policies remain in place as long as you're alive, assuming you keep up with the premiums. They build up cash value that you can borrow against without submitting a formal application or undergoing a credit check. The cash value can also be withdrawn and used for retirement income or other expenses, but doing so will lower your death benefit. Term life policies are designed strictly to provide a payout if you die—there is no investment component. They carry a specific term—from one to 30 years—and offer far more affordable premiums. Some term life insurance policies have a convertible option and can be changed to a whole life policy that accumulates cash value.
  • Riders: Some life insurance policies come with valuable riders or supplements. For example, if you become disabled and can no longer pay your premiums, a "waiver of premium" rider prevents your policy from terminating. Or, a "guaranteed insurability" rider allows you to increase the policy amount (or death benefit) without undergoing additional medical screenings or exams.
  • Cash value: Do you want a policy that builds up cash value over time? If so, a whole life policy is the best option, unless you purchase a convertible term policy that converts to whole or universal life insurance.

Is Life Insurance Worth It?

Life insurance can give you peace of mind knowing your loved ones will be protected if you die. If you don't buy a policy and leave few assets behind, your family may lose everything you've worked so hard for.

Since there's no restriction on how life insurance proceeds can be used, your family can cover funeral costs and other final expenses. The money can also go toward debts that belong to both you and your spouse, like your mortgage or other household expenses.

Life insurance proceeds can also provide financial support to your dependents by covering the cost of caring for them or long-term care for your spouse if they outlive you, or by paying the costs of a college education.

Find a Life Insurance Policy That's Right for You

Generally, the most affordable life insurance policies are reserved for those who are young and in good health. So, It's best to take out a life insurance policy if you're young with dependents or have more debts than assets. Life insurance is also ideal if your household relies on your income to cover expenses.

The purpose of this question submission tool is to provide general education on credit reporting. The Ask Experian team cannot respond to each question individually. However, if your question is of interest to a wide audience of consumers, the Experian team may include it in a future post and may also share responses in its social media outreach. If you have a question, others likely have the same question, too. By sharing your questions and our answers, we can help others as well.

Personal credit report disputes cannot be submitted through Ask Experian. To dispute information in your personal credit report, simply follow the instructions provided with it. Your personal credit report includes appropriate contact information including a website address, toll-free telephone number and mailing address.

To submit a dispute online visit Experian's Dispute Center. If you have a current copy of your personal credit report, simply enter the report number where indicated, and follow the instructions provided. If you do not have a current personal report, Experian will provide a free copy when you submit the information requested. Additionally, you may obtain a free copy of your report once a week through April 2022 at AnnualCreditReport.