Considering Life Stage, Not Just Age, When Purchasing Life Insurance
Life insurance provides reassurance that if the policyholder dies, the family will not suffer financially.
Life insurance premiums increase with age, making this cover more affordable when taken at an early age. However, age should not be the only consideration when determining when to purchase life cover. Life stage is another important factor because it ensures that survivors will not face serious financial consequences.
The Stages Of Life
Buying a home, getting married, and starting a family are major life events. When people enter these stages they should consider purchasing life insurance. With property or others depending on them financially, these individuals should not leave enormous debts for beneficiaries to handle.
People buy homes, get married, and have children at different ages, making it important to base life insurance buying decisions on these stages not strictly on age.
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Types of Life Cover
A whole of life policy is one of two types of life insurance. The policyholder pays a monthly premium and upon his or her death, beneficiaries receive a predetermined amount of money. This cover is more expensive than the alternative, called term assurance because it is inevitable that the policy will payout.
Term assurance covers a specified term during which the policyholder pays a premium each month. If the individual dies before the term ends, beneficiaries receive the payout. If the term concludes and the policyholder is still alive, nothing is paid out and submitted premiums are not refunded.
With a level term policy, the payout is established when the policy is taken and it remains the same throughout the policy term. With a decreasing term policy, the payout reduces over the policy term, making it suitable for repaying a mortgage balance that declines in accordance. A policy with a family income benefit pays income over a predetermined period rather than as a lump sum.
Term policies with extension options are available for individuals who extend their mortgage terms or convert to different policies. Many of these do not require a policyholder to start the application process over from the beginning.
However, these options may be expensive so getting advice from an insurance professional is recommended. Life insurance is sold directly to consumers online and through the premiums may seem low, these policies may have hidden terms and conditions.
Cost of Life Insurance
Smoking status, existing medical conditions, and age are several factors that determine premiums for life insurance policies. Premiums for a 15-year, level term policy featuring a £100,000 death benefit can nearly double from age 28 to 48. A term policy that ends at age 60 will cost almost the same for a 35-year-old as it does for a 48-year-old whose coverage period will be reduced by ten years.
Life Stage vs. Age
When determining whether to take out a life policy, consider individual circumstances rather than just age. For someone who is young with no dependents and no owned property, life insurance may be an unnecessary expense.
However, for someone who is young and owns a home or has children, life cover may be important. By the time an individual is older, has repaid the mortgage, and has grown children, the same level of life insurance may not be needed.