Friday, July 14, 2017

Too Young for Life Insurance?

The young rarely, if ever, think about their mortality. There is too much happening in their lives and so much that lies ahead contemplating the end of life is something that can easily be ignored. A young man or woman entering college has so many demands on their limited income that spending money on life insurance seems a waste when the risk of death seems remote. Insurance is something that can be thought about in the future, when obligations and responsibilities increase.

Delaying Is Expensive

What is often not realized is that while life insurance becomes an important issue as their lives and careers take shape, the longer they wait the more expensive it becomes. One of the most significant factors that affect the cost of life insurance is the age at which a policy is taken. The premium is set at the time a policy is purchased and the lower the age, the lower the premium. The premium will remain the same for the duration of the policy. A delay of a few years in purchasing a policy may not seem to be a major issue, but the typical increase in premium is between 8% and 10% for each additional year of age. In other words, each year of delay could mean increased recurring costs for every year of the policy. For example, a 45 year old who is in good health could purchase a 20 year $1,000,000 term life insurance policy for about $250 less per year than one who is in the same health but is 2 years older. This may not seem to be much (it works out to about $20 a month) but over the term of the policy, that translates into an additional cost of $5,000.

The increase may seem to be unreasonable, but there is a reason behind it. A human being has a finite lifespan and with each passing year the end of life comes closer. And in a time when life can be uncertain and filled with unexpected risk, death could come to anyone at any time.

Health Is another Factor

The cost of life insurance is based on the statistical probability of how likely it is that a policy holder will die and the insurance company will have to pay the claim. With increasing age, there is an increasing chance of having health problems that could affect the likelihood of a policyholder dying. The premium will rise to balance out the increased risk. That is why the older a person is, the greater the number of medical tests that have to be done before a premium is calculated and a policy issued.

The Younger the Better

With no obligations and few if any liabilities, purchasing life insurance may seem to be a needless expense for the millennial. What needs to be taken into account is the fact that life insurance is not for today; it is for the years that lie ahead and the savings of taking a policy when young can mean a substantial saving in later years when the need for insurance has grown manifold. To fully understand the benefits of taking out a policy at a young age, consult an insurance broker who will be able to lay out the benefits and savings as they affect different individuals.

No comments:

Post a Comment