How much time do we spend considering the extended warranty on our new smartphone? What about a washing machine or car? Many of us spend more time worrying about our iPhone than our own longevity. As unpleasant as it is to consider one’s eventual demise, it’s best done when that day is still hopefully far, far away.
One of the biggest mistakes people make is putting off the decision to buy life insurance. As a young adult it will be cheaper, you’ll be less likely to need a medical exam to qualify, and you can ensure your future insurability.
When should one buy life insurance? The best time to purchase life insurance is as soon as you become responsible for your own financial obligations. The next best time is now.
Why so young? When in our 20s, we think we’re invincible and really, the odds are we will be fine for decades. But you should consider buying life insurance at a young age so that if something happens to you, your car payments, credit card, funeral, rent or mortgage, and other final expenses would be covered. If nothing happens, you have cheap protection and have insured your insurability. While you are young, you may not have a strong need for life insurance, but that need will grow over time. Who knows, you might get married someday, have children, a mortgage, and the cheapest time to buy insurance is when you are young and healthy and you don’t need it.
How do I get guaranteed insurability? If you buy life insurance at a young age and want to convert your term life insurance into something more permanent, it’s a simple conversion and you don’t have to go through medical underwriting again. Otherwise you could be declined coverage because of a medical condition that arises, or be rated, meaning you’ll pay more.
How much should I have? It depends on a number of factors such as your age, financial obligations, family, employment and more. This is where a trusted insurance professional can help you determine the amount and type of coverage you should have.
Will I need to have medical tests to qualify? It depends. Young people may just have to answer the questions on the application. As you age, a blood test or other medical evidence such as a doctor’s report or EKG may be requested. One caution is, you must fully disclose your medical history to avoid having a future claim denied. Disclosing health concerns helps the underwriter make an accurate decision.
What if I have coverage at work? Many people think they have a lot of insurance, but coverage provided through employers is rarely enough and it doesn’t go with you when you leave that job. Consider a person 50 years old being laid off from his job. He now has to qualify for insurance at age 50 when premiums will be much higher, plus he now may have developed health issues.
The plus with having an individually owned policy, is that it’s yours wherever you go. This is one of the many reasons why I recommend people don’t buy life, disability or critical illness insurance from their lender.
As always, sit down with a trusted adviser to determine how much and which type of insurance fits best for you.