Purchasing life insurance is not a fun task, but it is one of the most important things you can do to protect your assets for your heirs. Married people generally need more life insurance than single people, but it is necessary for everyone to have at least enough life insurance to cover their final expenses.
The amount of life insurance coverage you need will probably change throughout your life. Your life stage will also determine how long your term period should be, how much insurance you should buy, and whether you should purchase a guaranteed policy rather than a term policy.
Insurance in Your 30s
If you are in your 30s, you are likely to have assets that need to be protected by insurance. You may have a family to provide for and your income is probably higher than it was when you were in your 20s. Many people purchase 30-year term life insurance policies in their 20s, so they may only need to purchase a small supplemental policy in their 30s to cover increased income and assets.
That’s initially what I did, but eventually I consolidated all my term polices into one larger policy that ended up saving me money. The benefit either way is that life insurance is cheap in your 20s or 30s.
If you are purchasing life insurance for the first time during your 30s, make sure that your policy is large enough to pay off your home, cover your family’s needs and pay off your debts. Some experts recommend that you purchase a policy that is at least 10x your annual income during your 30s so that your family will be well-provided for if something should happen to you.
If you can afford it financially, I would suggest a multiple of 15x-20x of your salary. Why? Assuming that you’ll be getting raises through the years at your job, you can lock in the rates now when you’re younger and probably much healthier.
Married people should each have their own life insurance policy, even if one is the sole provider. A parent that stays home with the children does many tasks that would have to be paid for if they were not around, such as child care and housecleaning. Life insurance would cover payment for these tasks for a significant amount of time.
Insurance in Your 40s
By the time you are in your 40s, you probably have significant assets that need to be protected. It is very important to purchase a policy if you haven’t before because you may develop health conditions later in life that will make it difficult to get life insurance at an affordable rate. Your policy amount should be about the same as you would have purchased in your 30s unless your income has increased substantially.
Your 40s are a great time to reevaluate your insurance needs and take stock of your finances. You may find that a supplemental policy is necessary, or you may need to replace a 20-year term policy that you purchased during your 20s.
Insurance in Your 50s
When you enter your 50s, you may find that your priorities are changing. Your children are likely to be able to provide for themselves and your mortgage may be completely paid off. Many people in their 50s find that they don’t need the amount of life insurance that they needed previously because they are no longer providing for their children’s care or paying for their mortgage.
You can use a term life insurance policy to provide an inheritance for your family. You can also use it to fund a trust or add a liquid asset to your estate. You are likely to find that life insurance costs more during your 50s than it did in the past, especially if you have been diagnosed with a high risk health condition.
Insurance in Your 60s
During your 60s you are likely to be past the stage of needing income to support dependents, but life insurance is still a great asset for your family. Purchasing a life insurance policy during your 60s may be expensive, but the peace of mind it provides is well worth the cost.
Keep in mind that your choices will be significantly reduced if you wait until after you reach age 65 to purchase a policy. Many companies will not sell a term policy to anyone who is over 65 years of age, regardless of health.
Insurance in Your 70s and Beyond
It may seem like it’s too late to purchase a term life insurance policy in your 70s, but many people are living into their 90s and there are insurance companies that sell policies specifically designed for seniors. At this stage of your life, it may be more affordable to purchase a permanent policy or some sort of guaranteed issue final expense plan. Life insurance is well worth the cost, even if you are only able to afford a policy large enough to cover your final expenses.
The fact remains that no matter what stage you are at in your life, there is some need for life insurance. Be sure to work with a life insurance professional that can work with you to determine the right solution for you.