When Do I Need Life Insurance?

You can consider buying life insurance at any age. If you have loved ones who are financially dependent on you and could inherit your debt, then you may want to consider buying a policy sooner than later. The younger you are when you buy a policy, the cheaper your premiums will be.

Lindsey Crossmier, writer for RetireGuide
  • Written by
    Lindsey Crossmier

    Lindsey Crossmier

    Financial Writer

    Lindsey Crossmier is an accomplished writer with experience working for The Florida Review and Bookstar PR. As a financial writer, she covers Medicare, life insurance and dental insurance topics for RetireGuide. Research-based data drives her work.

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    Lamia Chowdhury
    Lamia Chowdhury, editor for RetireGuide.com

    Lamia Chowdhury

    Financial Editor

    Lamia Chowdhury is a financial content editor for RetireGuide and has over three years of marketing experience in the finance industry. She has written copy for both digital and print pieces ranging from blogs, radio scripts and search ads to billboards, brochures, mailers and more.

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    Stephen Kates, CFP®
    Stephen Kates, Certified Financial Planner™ and personal finance expert

    Stephen Kates, CFP®

    Certified Financial Planner™

    Stephen Kates is a Certified Financial Planner™ and personal finance expert with over a decade of experience working with individuals and families who need help with their finances. With experience as a financial advisor for two of the largest financial firms in the country, Stephen has worked with hundreds of clients to build comprehensive financial plans to grow and protect their wealth.

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  • Published: May 5, 2022
  • Updated: September 8, 2022
  • 8 min read time
  • This page features 7 Cited Research Articles
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APA Crossmier, L. (2022, September 8). When Do I Need Life Insurance? RetireGuide.com. Retrieved September 27, 2022, from https://www.retireguide.com/life-insurance/when-do-i-need-life-insurance/

MLA Crossmier, Lindsey. "When Do I Need Life Insurance?" RetireGuide.com, 8 Sep 2022, https://www.retireguide.com/life-insurance/when-do-i-need-life-insurance/.

Chicago Crossmier, Lindsey. "When Do I Need Life Insurance?" RetireGuide.com. Last modified September 8, 2022. https://www.retireguide.com/life-insurance/when-do-i-need-life-insurance/.

How Does Your Age Impact Life Insurance?

The older you are, the more expensive your premiums for life insurance will be. Insurance rates rise roughly 10% each year you wait. You are also more likely to develop serious health issues as you age, which may cause your premium to go up.

According to the London International Insurance and Reinsurance Market Association (LIRMA), 42% of Americans reported that their family would struggle financially within six months if a wage earner passed unexpectedly — 25% said they would face financial hardships within a month.

Although many people start seriously considering life insurance as they near retirement, there are different reasons for life insurance coverage during every decade of your life.

Getting Insured in Your 20s

You will likely take on many new financial responsibilities in your 20s — such as student debt, loans for a car, or sharing bills and expenses with a partner for the first time.

According to the Consumer News and Business Channel, roughly seven in 10 college graduates are $30,000 in student loan debt. If you were to have an untimely death, your debt would be passed on to your loved ones.

As a young adult, you can benefit from locking in a low steady premium for years to come. Many people are in good health when they are younger, which also aids in affordable premiums.

Be sure to compare average costs with different life insurance companies to ensure you get the best price.

Monthly Premium Rates for a 20-Year Term Life Insurance Policy With a $500,000 Face Value
AgeAverage CostForesters Financial Life Insurance CompanyTransamerica Life Insurance Company
20-Year-Old Female$18.74$22.95$15.73

*These cost estimations are at a preferred plus rate, meaning the policyholder has no health problems and doesn’t smoke.

While everyone is in different stages of life, there may be a 25-year-old living with the same financial responsibilities as a 45-year-old —such as kids, a mortgage and other expenses to maintain. A life insurance policy can help give you the confidence you need to financially care for your dependents should anything were to happen.

Getting Insured in Your 30s & 40s

When you’re in your 30s or 40s, you may have multiple kids, a mortgage, business loans, debt or preparing college funds for your kids. These are all important to account for when trying to choose a life insurance policy.

The goal with life insurance is to make sure your loved ones’ current and future financial standing is protected. Luckily, premium costs are still low when you’re in your 30s and 40s — typically around $15 a month. If you smoke, or have any unhealthy or dangerous habits, this price could be much higher.

Monthly Premium Rates for a 20-Year Term Life Insurance Policy With a $500,000 Face Value
AgeAverage CostForesters Financial Life Insurance CompanyTransamerica Life Insurance Company
30-Year-Old Female$15.16$23.40$16.15

*These cost estimations are at a preferred plus rate, meaning the policyholder has no health problems and doesn’t smoke.

It would be beneficial to purchase a life insurance policy with fixed premiums during this time as some premiums triple by the time you turn 50.

Getting Insured in Your 50s & 60s

Those who are in their 50s and 60s tend to use life insurance to help leave an inheritance for loved ones, pay for long-term care or save for retirement.

Some life insurance policies have long-term care rider options that can help cover expenses not included in Medicare. Several permanent life insurance policies have cash value that grows at an interest rate, which you can borrow to use toward retirement or health care.

The chart below is for a term policy, not a permanent policy. Term policies do not hold cash value. If you want a permanent policy, it may be more than the price listed below.

Monthly Premium Rates for a 20-Year Term Life Insurance Policy With a $500,000 Face Value
AgeAverage CostForesters Financial Life Insurance CompanyTransamerica Life Insurance Company
50-Year-Old Female$55.44$91.80$33.58

*These cost estimations are at a preferred plus rate, meaning the policyholder has no health problems and doesn’t smoke.

Depending on what provider you choose, some policies come with riders for free. Contacting an agent can give you peace of mind to determine what policy best suits your needs.

Getting Insured in Your 70s & 80s

A 70- or 80-year-old looking to get insured may want coverage for final expense costs or long-term care. Final expense policies offer a death benefit to cover funeral and memorial service expenses. According to the National Funeral Directors Association, funerals cost around $7,848.

Getting life insurance in your 70s or 80s can be very costly. Compared to the other charts above with the same exact coverage, the average premium is over $600. This shows how important it is to purchase a life insurance policy early on in life.

Monthly Premium Rates for a 20-Year Term Life Insurance Policy With a $500,000 Face Value
AgeAverage CostForesters Financial Life Insurance CompanyTransamerica Life Insurance Company
70-Year-Old Female$697.42$687.90$697.43

*These cost estimations are at a preferred plus rate, meaning the insured has no health problems and doesn’t smoke.

Luckily, most people getting life insurance later in life don’t need $500,000 of coverage for a 20-year term.

A 70-year-old female can purchase a simple final expense policy with a $10,000 death benefit for as low as $53.77 a month. This is a far more affordable option in comparison to the $600 premium.

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What Should You Consider When Deciding to Buy Life Insurance?

When buying life insurance, consider how long you will need coverage, how much of your income you must account for and all your financial responsibilities.

Most financial experts recommend purchasing coverage worth eight to 15 times your annual salary. For example, if your annual salary is $45,000 and you want to have eight times that yearly coverage, your death benefit should be at least $360,000.

Type of Life Insurance

Though there are many different types of life insurance policies depending on the provider you choose, the main two policy categories are term and permanent. One is likely more beneficial to you over another.

Term life insurance is the more affordable option, offering coverage for a set period of 10, 20 or 30 years. You only receive your death benefit if you pass while your coverage is active.

Permanent life insurance is more expensive, but the policy lasts your entire life. You also typically have the option to build cash value.

Life Events

Life events, like buying your first home, having a child or managing a small business, should be influential factors when considering a life insurance policy.

When accounting for seven to 15 times your annual salary, these new financial responsibilities should be added to the face value of the policy.

Family & Dependents

If you have family members or dependents who rely on you financially, then a life insurance policy can provide security once you die. Most people (68%) look to purchase a life insurance policy to help replace lost income for their loved ones.

Your benefit amount will fluctuate based on how many people depend on your income. For example, a single person with no children will need less coverage than a married individual with three kids.

Health

As you age, you’re more likely to develop health issues, which raises your premium price. If you have a serious health problem, you could even be denied coverage.

Did you know?
According to the U.S. Centers for Disease Control and Prevention, 85% of older adults have at least one chronic health condition.
Source: U.S. Department of Health & Human Services

Consider the state of your health when looking to purchase a life insurance policy. There could be simple lifestyle changes, like quitting smoking, that can lower your premium. You can also reduce costs by sharing medical documentation with your life insurance provider to prove you are actively treating your condition.

Career

Some start to consider life insurance when they enter a new career. If your new job requires life-threatening tasks, such as a roofer or police officer, then life insurance can relieve the financial stress on your dependents if something happened.

A high-risk career will likely raise your premiums or make it difficult to gain life insurance coverage at all.

Some companies offer group life insurance to their employees, offering coverage for a more affordable price. Ask your employer if this is an option for you while you consider purchasing a policy.

What Happens If You Wait to Buy Life Insurance?

If you wait to buy life insurance, your premiums will become more expensive every year. You could risk financial pressure on your loved ones if you pass away with no plans to support them. The severity will range based on how many people financially depend on you and how much savings you already have.

According to the 2021 Insurance Barometer Study, 47% of Americans put off purchasing the life insurance coverage they need, and roughly four out of 10 policyholders wish they purchased their policies sooner.

Purchasing a policy at a young age can help you obtain the best premium price. Be sure to compare quotes with different insurance companies before purchasing a policy.

Last Modified: September 8, 2022
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7 Cited Research Articles

  1. National Funeral Directors Association. (2021, November 4). 2021 NFDA General Price List Study Shows Funeral Costs Not Rising as Fast as Rate of Inflation. Retrieved from https://nfda.org/news/media-center/nfda-news-releases/id/6182/2021-nfda-general-price-list-study-shows-funeral-costs-not-rising-as-fast-as-rate-of-inflation
  2. London International Insurance and Reinsurance Market Association. (2021, September). Facts About Life 2021. Retrieved from https://www.limra.com/siteassets/newsroom/fact-tank/fact-sheets/facts-of-life-2021-format-vfinal.pdf
  3. London International Insurance and Reinsurance Market Association. (2021, April 12). 2021 Insurance Barometer Study Reveals Common Misconceptions That Prevent Americans from Getting Life Insurance They Know They Need. Retrieved from https://www.limra.com/en/newsroom/news-releases/2021/2021-insurance-barometer-study-reveals-common-misconceptions-that-prevent-americans-from-getting-life-insurance-they-know-they-need/
  4. Epperson, S. & Dickler, J. (2019, October 29). Here’s Why You Should Buy Life Insurance When You Are Young. Retrieved from https://www.cnbc.com/2019/10/19/heres-why-you-should-buy-life-insurance-in-your-20s-or-30s.html
  5. U.S. Department of Health & Human Services. (2017, May 17). Supporting Older Patients with Chronic Conditions. Retrieved form https://www.nia.nih.gov/health/supporting-older-patients-chronic-conditions
  6. Transamerica Corporation. (n.d.). Insurance Plan Explorer. Retrieved from https://www.transamerica.com/planexplorer/get-quote/results
  7. Profam. (n.d.). How Much is Final Expense Life Insurance? Retrieved from https://www.profam.com/final-expense-life-insurance/