If there’s such a thing as the perfect theoretical time to buy life insurance, it has to be the day before you die. Unfortunately, there are several complicating factors. Very few people know when they are going to die. And those who do know that death is imminent likely have medical issues that would preclude them from qualifying for life insurance. Because of this, most people elect to buy life insurance based on one of two significant events in their lives – marriage and the birth of a child. In both cases, the decision is based on the desire to protect someone they love and has partial or complete financial dependence on them. But if neither of these scenarios apply to you, it might be difficult to see the point.
The thing to keep in mind is that your financial obligations don’t go with you to the grave; they can become the responsibility of your family. So even if you don’t have people who are dependent on you, there are most likely people in your life who would be financially burdened by your passing. Beyond that, there is a purely economic case to be made for not waiting to purchase life insurance: it is most affordable when you are young and healthy because the payments get slightly more expensive every time you have a birthday. And if you’re unfortunate enough to develop even a non-life-threatening medical condition, life insurance can suddenly become prohibitively more expensive.
There are a couple of very valid objections to purchasing life insurance before you have a dependent. The first is that you don’t plan to ever get married or have children, so you will never need it. The second is that allocating a significant portion of your budget to life insurance in your 20s could preclude you from doing other important things – like living life or investing for your future.
It’s hard to quibble with the first objection, except to say “How can you be sure you won’t change your mind?” But if you’re worried about the second objection, that one’s easier to address – because there’s a compromise approach that can allow you to prepare for the future without tying up too much of your monthly paycheck. By purchasing a permanent life insurance policy now – even one with limited coverage – you can lock in a rate that won’t go up for as long as you own the policy. And by including what are known as guaranteed insurability options, you will be able to purchase additional coverage if and when you need it, without providing any additional evidence of insurability.
What if you purchase a permanent life insurance policy and it turns out that you don’t need the coverage for another five, or even 10 years? Believe it or not, if you live to a normal life expectancy, you will still pay less than if you had waited to purchase the insurance. Plus, if it turns out you don’t need the coverage and elect to cancel the policy, you will receive at least a portion of the premiums back. And in some cases, even accrue some additional interest.
There’s one more attractive feature of permanent life insurance. As long as you pay your premiums, it’s guaranteed to be in place when you die. And isn’t that the reason most people buy it in the first place?