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When Should You Buy Life Insurance?

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Wednesday, March 11, 2015

When Should You Buy Life Insurance?

It's hard to come to terms with death. But if you want a life insurance policy that covers your family's needs, you've got to pick a plan before you die. Which means now is the time to think about your mortality.

Before you get too worked up over that depressing topic, look at the bright side. Life insurance protects your family after you're gone. And your family's well-being is your biggest priority. So the real question is this: Do you need life insurance now, or can you wait to buy it?

Here's the short answer: You should buy life insurance as soon as you have dependents. And you should keep it as long as your income is supporting them. For some Americans, that means having life insurance from the time they have kids to the age they retire. For others, that means having it from the day they get married to the day they die.

The Best Time To Get Insurance Depends On Your Family Needs

Life insurance helps pay off your debts, replace your income, and offset big future expenses. To decide when to buy it, think about the living costs your family will have to cover when you die. Here's what to consider:

Debt

Every family has expenses: credit card payments, a car loan, a mortgage, college tuition for your kids. Add these expenses together, and figure out if your family could pay off these debts without your income or insurance coverage. If not (which is pretty likely), now's the time to buy a policy.

Income

You typically want a big enough policy to cover about five to seven years of your salary. If you have debt or young children, you might want 10 or more years of salary replacement. So if you make $50,000 a year, you'll need at least $250,000 to $500,000 to cover that. And chances are, you don't have that kind of cash in your savings account. It's time to think about life insurance.

Marriage

If you're single at any age, and not supporting anyone, you might not need life insurance. Because your income is putting a roof over your head -- no one else's. If you're married, you'll want enough coverage to support your spouse's living costs until they can get back on their feet.

Kids

You might be a single, working parent or a married, stay-at-home parent. Or you and your spouse might work full-time and have a lot of other finances to manage. Think about what would happen if you—the single, stay-at-home, or working parent-died. How would your kids take care of themselves? They would need the financial help from your life insurance policy.

Age And Health

As you age, your health will decline, and your life insurance premiums will go up. Buying life insurance at a younger age means you'll pay less for a policy. It also means you'll cover your kids while they're young while your family probably has very little savings.

So, if you're planning to get married or have kids by 28, that's the best time to get life insurance. It's cheapest at that age, and you'll have a safety net for your kids (or spouse) if you die.

Type Of Policy

When you buy insurance also depends on which type of life insurance you buy. If you buy term life, your policy ends after a certain time period -- from one to 30 years. You'll have to buy a new policy when it expires. If you buy whole life, you'll only have to buy life insurance once.

Look At Policy Options Now

So, when is life insurance necessary? It depends on two things: when you start a family, and how much your living costs will be. If you kick the bucket, and your family can't pay for their biggest expenses, you're much better protected with life insurance.

And it doesn't hurt to look at your options now. Talk to an expert agent. They'll help you decide which policy to buy and when to buy it. So you can breathe easy knowing that if something happens to you, your family will be taken care of.