How Young is Too Young for Life Insurance?
Should you start a life insurance policy when you’re young? Or, if you’re a parent, should you start a policy for your children or babies now? If you’re a millennial, life insurance might not be an immediate goal. You’re likely exploring employment opportunities and thinking about your first home purchase. Likewise, with young children, your focus might be on saving for their education. You might also be focusing on your retirement savings and paying off your home. But, locking in rates early on a is cost-effective and these tax-deferred accounts have savings incentives.
Here are a few reasons why it's never too early to start a life insurance policy.
Why Start a Policy Early for Babies or Young Children
Life insurance rates increase every year so policies will become more expensive.
Here are a few benefits to opening one now:
Policies can be cashed out
For babies and children, a whole life insurance policy can transfer when they turn eighteen. The child can then elect to keep the policy and continue to pay on it. Or, they can cash it out if there’s equity.
Policies are tax-deferred and have cash values
Life insurance policies are tax-deferred. Because the contributions increase in value over time, the cash value on a fixed term policy adds up:
- A child can use the money towards a down payment on their first home.
- They can pay off student loans or put the money in a retirement account.
- Or, extending it until retirement can provide them with additional retirement income.
Why Start a Policy Early for Millennials
If you’re a millennial, a life insurance policy in your early 20s or 30s is cost-effective.
Life insurance rates will increase eight to ten percent each year. Starting a policy now might only cost $20-25 each month for a typical $500,000 term life insurance policy over 20-years.
It’s Added Insurance
Did your parents take student loans out for you? With life insurance, if anything happens to you, your parents won’t be left with the burden of paying back your loans.
It's a Savings Vehicle
Because life insurance money accrues, it has a savings component. It's not like a bank account where money can be accessed right away. But, millennials should have a policy in place. They should set one up after they max out TFSAs, save toward their first home and set aside money for a six-month emergency fund.
Why It's Better Not to Wait
Starting a policy early is beneficial. Consider an Ottawa man who started his policy after buying his first home. When he went for his medical tests, he was diagnosed with a medical condition that raised his life insurance premium. Had he not waited, he could have locked in a better rate.
Other reasons to start a policy early include:
Peace of Mind
Are you the primary breadwinner? If you’re married and carrying a mortgage, a policy can take the stress off your spouse if something happens to you.
Not sure how much life insurance you should have? Use this convenient life insurance calculator.
Your Money's Not Wasted
If you bought a home, don't think that mortgage insurance is all you need. When you make mortgage payments, your loan decreases but your payments for mortgage insurance don't. It's money the bank keeps.
You Can Lock in Rates
Premiums will go up every year you wait. Here are a few sample rates.
Non-smoking men with a twenty-year term $100,000 policy will pay:
- Twenty-five-year-olds pay $11.61/month ($129 annually).
- Thirty-year-olds pay $11.64/month ($129.35 annually).
- Thirty-five-year-olds pay $13.60/month ($151.16 annually.
- Forty-year-olds pay $16.74/month ($186 annually).
Non-smoking women with a twenty-year term $100,000 policy will pay:
- Twenty-five-year-olds pay $9.81/month ($109 annually).
- Thirty-year-olds pay $10.26/month ($114 annually).
- Thirty-five-year-olds pay $11.34/month ($126 annually.
- Forty-year-olds pay $12.72/month ($141.29 annually).
Shop Around for Life Insurance Policies
Policies are affordable and you can lock in cheap rates. Then, as you add major life events like marriage and children, you can make adjustments to add your family to your policy.
To help you find a policy:
- Compare life insurance policies: By comparing quotes, you can get the best rates now.
- Consider any medical conditions you have: A cancer or diabetes diagnosis might cost more with one insurer. But, shop around. Other insurers may be more accommodating.
- Customize your insurance policy: Not sure of the benefits you want? Talk to an agent. They can include riders like an accelerated death benefit. This provides faster payouts to cover medical costs for a terminal illness.
- Check with your employer or school: Some organizations offer low-cost or free life insurance. These plans typically include coverage for accidental death or dismemberment.
Ready to Find the Best Life Insurance Rates?
Start a life insurance policy early if you're young. You can lock in rates and make adjustments for major life events. If you have babies or small children, start their policies now. Then, when they turn eighteen, they can keep paying the policies or cash out their value. And, to find the best life insurance rates, visit Kanetix.ca.
With Kanetix.ca, you can compare costs from the best insurance providers in Canada. Shop for life insurance today!