When should you buy life insurance? When buying life insurance, it often saves you money if you think about the transaction from the insurance company’s point of view. Their goal, of course, is to take in more insurance premiums than they have to payout in claims.
So, which populations of the insurance company’s potential client base will pay more insurance premiums before they die and their family claims the payout. It’s the law of large numbers and averages at work. And, it’s where actuaries make their living.
When Should You Buy Life Insurance?
Here are a few examples that often drive the cost of your life insurance premiums. If you know and understand what goes into these calculations, it will better help you understand the underlying principals behind when you should buy life insurance.
Buying Insurance While Young Is Cheaper
Life insurance premiums are typically cheaper if you purchase the policy and start making premium payments while you’re young. You typically lock in a better rate because you statistically pay the insurance company for a long time before your family will make a claim against the policy for your death.
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During the years or decades, until you file a claim, the insurance company will continue to collect monthly premiums from you. They will invest that money and make it grow. They’ll use it for other people’s payouts and get ready for the eventual need to payout your claim. Or, maybe in some cases like term life insurance, you may outlive your policy altogether. Either way, starting young when buying life insurance equals a cheaper premium payment for you.
Buying Insurance While Young Is Healthier
It’s typically cheaper to buy life insurance when you’re younger because young people are typically healthier than older citizens. The greater risk you are of dying will equate to a higher life insurance premium when you purchase a policy. It’s a sad but true statement. That’s why young consumers typically receive a lower premium quote from life insurance companies.
Younger consumers are typically healthier than their older counterparts. Older purchasers of life insurance may already have preexisting conditions or health concerns that weigh on a life insurance company’s coverage decision. These factors are added into their likelihood of paying out a claim. The greater the likelihood of a payout will equal a higher monthly premium for you.
Here’s a great quiz from the folks at HealthIQ to see just how much you know about scoring cheaper life insurance and if you know the perfect time when should you buy life insurance.