Your 30’s is the optimal time to get life insurance because insurers reserve the best rates for young, healthy applicants. Buying a policy now can lock in low rates for decades or life, depending on what type of life insurance you choose.
Continue reading to find out how much life insurance costs for applicants in their 30’s and more.
When Should I Consider Purchasing Life Insurance?
If someone depends on you financially or if your death could impose a financial hardship on a loved one, it is about time you start shopping for life insurance. For most people, there are three big life-event triggers for buying a life insurance policy:
- Marriage – Now that there are two of you in the picture, you might want to start planning for the future. Buying a policy can provide both financial security and peace of mind. If something were to happen to you, it can help keep your spouse afloat.
- Birth of a child – You are now responsible for the young family you have created. You might want to financially protect your loved ones and ensure expenses, like childcare and education, are well taken care of.
- Purchase of a home – For most people, buying a home is their biggest financial decision. So, it makes sense to protect your investment from life’s uncertainties. The last thing you would want is for your family to exhaust their savings paying off the mortgage or, worse, lose their home if you die prematurely. A term life plan is a good way to cover your home loan and other debts should the worst happen.
How Much Life Coverage Do I Need?
Life insurance needs are rarely one-size-fits-all. Hence, there is no one answer to this question. How much life insurance you should buy depends on your financial situation and the reason for buying it. Most people in their 30’s get a life insurance policy to ensure a partner, parent, or friend does not inherit their debts or to secure their family’s financial future.
You are looking for a policy to cover your debts
Unpaid debts do not necessarily disappear when you pass away. Lenders collect the outstanding balance from your estate, but if a loved one is listed as a co-borrower or co-signer, they will inherit what you owed. And in the case of a mortgage, the lender can sell your home to recover the balance.
If you do not want your family to lose their home or be stuck with your debts after you pass away, put a life insurance plan in place. The death benefit should be large enough to pay off all your debts and the coverage should last as long as your largest debt.
You are looking for a policy to replace part or all your income
Income replacement is one of the main reasons many people have life insurance, especially those with dependents. Here are three rules of thumb that can help you come up with a figure that would provide adequate protection to your family.
Multiply your yearly income by 10
Most financial experts agree that you must be covered for at least 10 times your yearly income. If you make $100,000 a year, you should be looking at one million in coverage.
Multiply your income by 10 and add at least $20,000 per child for college tuition cost
Do you have kids or are you planning to have them in the future? If so, factor in the price of post-secondary education for each of your children.
The DIME formula
This rule of thumb considers your family’s needs in detail and helps you cover four key areas — debt, income, mortgage, and education.
- Debt – How much debt would your family inherit after your death? This could be a home loan, a student loan, or any other debt.
- Income – Multiply your current annual income with the number of years for which your family would need financial support.
- Mortgage – If you are listed as a sole owner of a property, the mortgage is not written off after your death. Instead, the lender could seize and sell your home to recover the balance. If you do not want your family to lose their home after you pass away, factor in the mortgage balance as well.
- Education – Lastly, add how much each of your children will need for college education to your running total.
Factors Affecting the Cost of My Life Insurance
Life insurers look at all factors that affect your mortality while calculating your premium rate. Besides these, the type of policy and the coverage you choose also impacts your life insurance cost.
Your health and lifestyle
- Age – The younger you are, the higher your life expectancy, meaning insurers offer their best rates to younger applicants. That is why the best time to buy life insurance was yesterday and the second best, today
- Gender – Men usually pay more for life insurance than women, and there is a pretty simple reason for why: it all comes down to mortality. On average, a woman’s life span is 8% longer than that of a man.
- Smoking status – Smoking is linked to an increased risk of several health conditions, like diabetes and heart disease. Given this, it should come as no surprise that insurers charge smokers higher premiums. Depending on your health, you can end up paying anywhere between two to five times the non-smoking rate.
- Health – Any health condition that shortens your life expectancy will bump up your rates. Brace yourself for higher premiums if you have an above-normal BMI, high blood pressure, or diabetes.
- Family medical history – Certain diseases have a genetic component, like heart disease, arthritis, and diabetes. If one or more genetic inheritance disorders are common in your family, your insurance may increase your rates.
- Occupation – If you have a job that puts you in dangerous situations —firefighters, roof contractors, or pilots — you are likely to pay a higher premium than someone with a desk job.
- Activities – Love adrenalin-rush activities, like skydiving? If so, expect to pay more for life insurance.
- Driving record – Just like smoking or a disease, bad driving increases your chance of death and will push up your rates — sometimes drastically.
- Type of policy – With term life insurance, you get coverage for a limited period. Permanent life policies — such as whole life insurance and universal life insurance — last your entire lifetime. Many of them also build cash value. Generally speaking, permanent life insurance costs six to 10 times more than term life.
- Amount of coverage – The higher the death benefit, the more the policy will cost. A $2 million plan will be costlier than a $1 million policy, if all else remains the same.
- Term length - If you go with term life, a longer term, such as 30 years, will cost you more than a shorter term.
- Riders – Riders add additional benefits to your life insurance plan — some for free, some at a cost. Adding riders like accelerated death benefit can increase your life insurance cost.
Is There a Way to Lower the Cost of My Life Insurance?
While there is not much you can do about your medical and family history, many factors that impact your rates are under your control. Here are seven ways you can pay less for life insurance.
Your life insurance cost can go up significantly if you smoke. The good news is staying smoke-free for 12 months can get you better rates. However, putting off buying coverage until you have quit might not be a good idea because it can leave your loved ones vulnerable. Instead, buy the best-priced policy you can get at a smoking rate and ask the insurer about how you can be re-evaluated after you have quit.
If you bought a policy at a smoking rate and are now tobacco-free for one year, request the insurer to reclassify you. You may have to undergo a medical test again to secure non-smoker premium rates.
Get in shape
When you apply for coverage, life insurers will ask questions about your overall health. Although you cannot turn back or stop the clock, you can take steps to lose weight and better manage diabetes, high cholesterol, or hypertension, if you have any of those conditions.
Carefully consider how much coverage you need
You may want a $5 million policy, but the question is — do you really need that much coverage? While it is always better to carry more life insurance than less, having far too much coverage can mean wasting thousands of dollars on unnecessary premiums.
Go with term life insurance
For most people, a term life policy is a great option. It is a lot cheaper and easier to understand than whole life insurance or universal life insurance. Unless you have unique needs, like a lifelong dependent, you are likely to be better off with term life insurance.
Beware of hidden fees
Life insurers often charge extra fees if you pay premiums monthly instead of annually. Also, some policies may include riders that may offer features you do not need but will raise your premium rates.
Combine your and your spouse’s policy into one
Instead of purchasing a separate policy for yourself and your spouse, you might want to consider a joint life insurance plan. In many cases, a joint policy is significantly cheaper than managing two individual policies.
Joint policies are of two types: joint first-to-die and joint last-to-die. The former pays the death benefit after the death of first spouse. The latter issues the proceeds after both spouses pass away. A joint first-to-die plan is usually a better option for couples looking to use life insurance as an income replacement tool. However, if you want your policy to offset taxes payable upon death, a joint last-to-die policy would likely be a better fit.
Premium rates vary wildly by insurer. If you do not want to pay a penny more for coverage than you have to, compare quotes from different providers.
How Much Does Life Insurance Cost?
So, how much does life insurance coverage cost for someone in their 30’s?
Your premium rates depend on your exact age. The younger you are, the lower the premiums. For instance, other things being equal, a 30-year-old applicant will pay less for coverage than a 39-year-old person. Other main factors that impact your premium rates are your policy, gender, health, and smoking status. Generally, life insurance costs do not radically change throughout your 30’s, but there is an increase.
For example, a 30-year-old non-smoking, healthy female may pay $21.88 for a 20-year term life policy with a $500,000 death benefit. For a 35-year-old female, the same policy may cost $24.39. A healthy 30-year-old male can expect to pay $27.46 for a 20-year, $500,000 policy, while the same coverage may come with a price tag of $28.97 for a 35-year-old male.
Interested in buying a whole life policy? Rates are considerably higher. A non-smoking, healthy 35-year-old male is likely to pay approximately $517 a month for a $500,000 plan.
If you have debts that will become someone else’s responsibility after your death or people who depend on you financially, life insurance is worth considering. Buying it early, when you are young and healthy, makes a lot of sense. Life insurance companies tend to offer lowest rates to these applicants. If you are looking for a life insurance policy — term or whole life — you can count on Dundas Life to get you the best rates.