Men often find themselves thinking about life insurance after events that make them stop thinking about “I” and start thinking about “we”. Which means marriage or having kids, in most cases. Trouble is, insurance cost, rates, and payouts are all based on the amount of risk you pose to the insurance company, which is calculated by considering factors such as age, weight, and previous medical history.
That’s a long way of saying that the sooner you start paying for life insurance, the better a deal you’ll get. So even if you haven’t started thinking in terms of “we” yet, take this moment to learn more about how life insurance works. If you are still in your 20s or your 30s, you may find that insurance is incredibly affordable.
In this article, we are going to cover how life insurance works, the main types of life insurance, and the benefits of getting an insurance policy early in life.
How life insurance works
A life insurance policy will pay a beneficiary of your choice a pre-established sum of money in case you die. In exchange for coverage, you will have to pay your insurance company premiums, which can be paid monthly, yearly, or upfront as a lump sum.
On top of that, you may also receive your policy’s partial or complete payout in case you find yourself critically or terminally ill. The details depend on the specifics of your insurance policy.
The main types of insurance
There are about a dozen ways clever accountants can set-up life insurance policies, including types of life insurance that double as an indirect investment in the stock market. But for an introduction to the topic, there are only two types of life insurance you should be concerned with: term life insurance and whole life insurance.
Term life insurance is often the cheapest and most accessible option. As the name suggests, these policies only last for a specific amount of time — a term. Generally, term policies will insure you for thirty years, and as a healthy adult in your 20s or 30s, you can expect to spend around $50 a month for a thirty-year policy.
Whole life insurance, on the other hand, will cover you until the day you die, whenever that happens. For young people, these policies are often more expensive than term policies, but they do have the benefit of having fixed premiums — so what you pay today will be what you’ll be paying in 60 years. It’s the right solution for people with money who want a permanent solution to their insurance needs.
The benefits of buying life insurance early
The younger you are, the cheaper your insurance premiums will be. On top of that, the longer you wait to get an insurance policy, the higher the risk of you developing health conditions that can greatly increase the cost of premiums. It’s also easier to get more coverage for fewer costs when you are younger.
This means that even if you don’t have a beneficiary in mind, it may be worth it to start a policy in your early 20s. This way, you’ll have a strong policy in place by the time you start your own family in your early 30s.
Finally, should the worst come to pass, having an insurance policy will ensure that your funeral costs and other expenses are paid for, which may alleviate the financial burden being placed on the people who care about you?
Interested in learning more? Check out this list of best life insurance policies in 2020.
This content is brought to you by Steven Gallagher.