If you’re young and have no kids or aren’t married, paying for life insurance might sound like a waste of money. But there are three situations in which it might be a good idea to get at least a little coverage to save your loved ones from incurring extra costs when you die or to prepare for the future.
You Don’t Have Enough Saved to Pay Your Final Expenses
Even if you don’t have any dependents, someone is going to have to pay your funeral and other final expenses. The average funeral costs between $7,000 and $10,000 at minimum, according to Parting.com, with some costing upwards of $25,000 — and it includes a lot more expenses than you might think.
Here’s just a sampling of some of the costs your loved ones might have to pay:
- Funeral director services
- Grave site
- Grave liner and burial container
If you died due to an injury or illness, your loved ones might also be on the hook for some of your medical expenses, especially if they share joint ownership of some of your assets.
So, even if you don’t have anyone to whom you want to leave money, it might still be a good idea to get a small policy to cover final expenses.
You Want to Lock in a Low Rate
The best time to get affordable life insurance is when you’re young and healthy. When I sold life insurance in college, my wife and I had few debts, so it didn’t make sense to buy anything but a basic term insurance policy.
But since I was in good health and in my mid-20s, I figured that buying more than I needed might pay off in the future, especially if my health changed — and it did. I don’t have any major medical issues, but I’m not as active as I used to be, so I’ve packed on more than a few pounds along the way.
The last time I talked to my insurance agent, I asked how much I’d have to pay if I applied for the same coverage now that I’m older and need the coverage. With my change of health and age, he estimated I’d end up paying 50% more than what I’m paying now.
Of course, there’s no guarantee that your premiums would increase by that much; life insurance rates depend on a variety of factors. But it’s a given that your rates will increase as you get older, and if you develop a major medical condition, it could hike your rates even more.
You Want to Lock in Your Insurability
If your family suffers from various medical issues, it could increase the likelihood that you develop the same problems.
Depending on the condition, it could even make you uninsurable with some life insurance companies. But once you get approved for a life insurance policy, the insurer can’t cancel it if you develop a medical condition or become seriously ill.
Level-term life insurance policies typically offer terms up to 30 years, which means you can lock in your insurability for most of your adult life.
What Kind of Life Insurance Should You Get?
Since you likely don’t need a lot of insurance coverage right now, your best bet is to get an inexpensive life insurance policy. Term insurance is a great option because it doesn’t involve extras like cash-value accounts or investment opportunities.
To make sure you get the lowest rate, it’s important to compare quotes from several different insurance companies. Also, look into different riders each insurance company offers.
For example, some may allow you to convert your term policy to a whole life policy, which guarantees insurability for life, without having to undergo another medical exam.
Some others may offer a guaranteed insurability rider, which allows you to buy additional coverage on your policy without having to prove your insurability again.
These riders may or may not cause your premiums to go up, so make sure you understand how those can affect you.
The Bottom Line
Just because you don’t need life insurance now doesn’t mean it’s not a good time to buy some. Getting the right coverage at the right time is part of building a comprehensive financial plan, and you may thank yourself later if something happens that affects your ability to get insured at a low rate.
But as mentioned previously, it’s critical to shop around and compare several life insurance companies to make sure you get the best deal. Our licensed life insurance representatives can help you with this process with a free consultation.