If there’s such a thing as the perfect theoretical time to buy life
insurance, it has to be the day before you die. Unfortunately, there
are several complicating factors. Very few people know when they
are going to die. And those who do know that death is imminent likely
have medical issues that would preclude them from qualifying for life
insurance. Because of this, most people elect to buy life insurance
based on one of two significant events in their lives–marriage and the
birth of a child. In both cases, the decision is based on the desire to
protect someone they love and who has partial or complete financial
dependence on them. But if neither of these scenarios apply to you, it
might be difficult to see the point.
The thing to keep in mind is that your financial obligations don’t go
with you to the grave; they can become the responsibility of your family.
So even if you don’t have people who are dependent on you, there
most likely are people in your life who would be financially burdened by
your passing. Beyond that, there is a purely economic case to be made
for not waiting to purchase life insurance: it is most affordable when
you are young and healthy because the payments get slightly more
expensive every time you have a birthday. And if you’re unfortunate
enough to develop even a non-life-threatening medical condition, life
insurance can suddenly become prohibitively more expensive.
18 | January 2019 | Real Hero Report
There are a couple of very valid objections to purchasing life
insurance before you have a dependent. The first is that you don’t
plan to ever get married or have children, so you will never need it.
The second is that allocating a significant portion of your budget to life
insurance in your 20s could preclude you from doing other important
things–such as living life or investing for your future.
It’s hard to quibble with the first objection, except to say, “How can
you be sure you won’t change your mind?” But if you’re worried about
the second objection, that one’s easier to address, because there’s
a compromise approach that can allow you to prepare for the future
without tying up too much of your monthly paycheck. By purchasing a
permanent life insurance policy now–even one with limited coverage–
you can lock in a rate that won’t go up for as long as you own the
policy. And by including what are known as guaranteed insurability
options, you will be able to purchase additional coverage if and when
you need it, without providing any additional evidence of insurability.
What if you purchase a permanent life insurance policy and it turns
out that you don’t need the coverage for another five, or even ten
years? Believe it or not, if you live to a normal life expectancy, you will
still pay less than if you had waited to purchase the insurance. Plus, if
it turns out you don’t need the coverage and elect to cancel the policy,
you will receive at least a portion of the premiums back, and in some
cases, even accrue some additional interest.
There’s one more attractive feature of permanent life insurance. As
long as you pay your premiums, it’s guaranteed to be in place when you
die. And isn’t that the reason most people buy it in the first place?
The Right Time to Buy Life
Insurance
Pre-Qualification versus
Pre-Approval Letters and
Interest Rates
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