If you were to ask if single people without dependents need to get life insurance, most people would say no. However as with most financial decisions, things are just not that black and white. If you are a 30-something single person living alone and have no children it might seem like a big waste to buy term life insurance. Who are you going to leave your money to after all? You don’t the issue of having any children or a spouse depending on your income. That is very true, however there is a very interesting fact regarding life insurance that place people who put off buying it at a big disadvantage.
It concerns insurability and premium costs. When it comes to insurance, you will have to pay more for your policy the less healthy and older you are. This is basically common sense if you stop and think about it. For example, if a twenty year old would like to purchase a term policy for 30 years, the insurance company realizes that the policy is going to expire when the individual is only 50 years old. Statistically speaking the chances of the individual dying during the term is very low. If you compare that scenario with a 45 year old who wants to purchase a 30 year term policy, the insured individual is going to be 75 when the policy expires. There is a higher chance that this individual will die during the policy term, therefore the insurance company will charge a much higher premium because they have to assume a much higher risk.
The same scenario is true when it comes to the state of your health. When you are 25 years old you may be in great shape and not have any major medical conditions. Therefore an insurance company will be more willing to insure you because you because you haven’t developed major health issues yet. In ten to twenty years, you may end up developing health issues that potentially could render you uninsurable. What happens if you wait a couple years until you end up getting married or having children and then discover you are unable to provide them with the protection that they need due to the fact that you developed a health issue that you can’t control?
Here’s A Look at the Numbers
You may be wondering what the different in premium costs are for healthy individuals as they get older. Using quotes from a number of insurance companies here are some average numbers for a $500,000 30 year term policy with a non-smoking preferred status.
25 years old $525/year or $15,750 total cost
30 years old $550/year or $16,500 total cost
40 years old $810/year or $24,300 total cost
45 years old $1,420/year or $42,600 total cost
Between the ages of 25 and 30, there isn’t a big difference in how much the policy costs. However, if you wait 10 years and buy a policy at the age of 40, the cost is 47% higher and will cost you almost an additional $8,000 over the term of the policy. If you wait another five years, the premium cost is almost double and will cost you an additional $18,000. These numbers help illustrate how important it is to not wait to buy term life insurance. The earlier you can purchase your policy the more money you will save.
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So should a 30 year old single individual rush out to purchase life insurance? Maybe. You need to take a good look at what your lifestyle and individual situation is to try and determine whether life insurance is something you are going to need sometime in your future. If you enjoy being single and don’t plan on ever getting married or having a family then you might not need to purchase life insurance. However, if you are 30 years old and in a serious relationship and hoping to settle down finally and possibly in a couple years have a family, then you should start to look at what your options are. Waiting just five years to buy life insurance, as you have seen, can really make a huge difference in the amount you will pay ultimately. Even if you pay for life insurance coverage for a few years without being married or having children, you could still end up saving yourself thousands of dollars. Don’t forget our worst case scenario. You could develop a health issue later on while you are waiting and then all of a sudden you won’t be able to obtain any life insurance or will have to pay such high premiums that it won’t be affordable to you.
What you need to do is analyze your situation to see if buying life insurance right now makes sense for you. If you happen to be in a committed relationship with marriage as a distinct possibility, the sooner you obtain coverage the less you will need to pay. On the other hand if getting married or having children isn’t on the horizon for you, then you may not need to get life insurance right now. You may have other ways you want to spend your money. It all depends on what your individual circumstances are.
When you are single, don’t allow life insurance to interfere with other financial goals that you have. If you are weighed down with debt, have large student loans to pay off, or need cash for other important things you may need to reconsider life insurance at this time. If it will take you longer to pay your high interest debt off, saving money on life insurance right now may not be worth it.
What’s the point if you don’t have any kids or aren’t married? Who would you be leaving your money to? When it comes to life insurance one of the great things is you can generally change your beneficiary any time. So initially if you aren’t married you can name someone else other than a spouse or child as your beneficiary. It could be your parents or brother or sister. You could even name your favorite charity as your beneficiary. That way if the worse case scenario happens and you should die before getting married or having children at least you know your money will be going to a good cause or to someone you care about. Then if you do happen to have children or get married you can just change your beneficiary on your life insurance policy.
Buying life insurance at a young age doesn’t make sense for every single individual. However, you should really consider the increased premium and total costs on a policy when you wait several years. There will be situations where it makes sense to buy a policy and there will be other situations where the savings still aren’t worth it due to other financial obligations or your personal situation. Just remember, when it comes to financial planning life insurance is a very key component so you should seriously consider it. Remember that in our example the policy was just simple $500,00 term insurance for someone who had excellent health. Other scenarios where there are health issues or higher coverage could potentially make the cost differences even more substantial when waiting only a couple years. In some cases you could save tens of thousands of dollars by buying a policy right away instead of waiting.
If you happen to be someone you has children and/or marriage on your future horizon, it might be a good idea for you to run a few quotes so you have a good idea of the type of savings you could enjoy from purchasing a life insurance policy early. You could discover that you wouldn’t save much from purchasing early or you could end up saving thousands of dollars. No mater what your numbers look like, taking a proactive approach is always a very good idea.
