Millennials have good
reasons to obtain coverage now.
Provided by Benjamin Bogetto
Do you plan to buy life
insurance before you turn 40?
Maybe you should. You may save money in the long run by doing so.
At
first thought, the idea of purchasing a life insurance policy in your thirties
may seem silly. After all, young adults are now marrying and starting families
later in life than past generations did, and you and your peers are likely in
excellent health with a good chance of living past 80.
In
fact, LIMRA – a life insurance research and advocacy group – recently surveyed
millennials and found that 30% thought saving for a vacation mattered more than
buying life insurance coverage. The perception seems to be that insurance is
something to purchase when you start a family or when you hit your forties or
fifties.1
Getting a policy before
you marry or start a family may be a great idea. The
reasons for doing so might be compelling.
Your premiums will be
lower. The older you
become, the more expensive life insurance becomes. Data compiled last summer by
Life Happens, a non-profit life insurance education effort, confirms this.
Life
Happens asked several prominent U.S. insurers to supply their preferred premium
rates for healthy non-smokers aged 25, 35, 45, and 55 buying a $250,000 whole
life policy (the kind designed to build cash value with time). The average
preferred premium rates for 25-, 35-, and 45-year-olds fitting this description
were:
25-year-old male: annual premium of $1,987
35-year-old male: annual premium of $2,964
45-year-old male: annual premium of $4,747
25-year-old female: annual premium of $1,745
35-year-old female: annual premium of $2,531
45-year-old female: annual premium of $3,947
The
numbers starkly express the truth – whole life insurance premiums more than
double between age 25 and age 45.2
Premiums
on term life policies are even lower. Term life insurance is essentially
coverage that you “rent” for 10, 20, or 30 years – it cannot build any cash
value, but in some cases, a term policy can be adapted or exchanged for a whole
life policy when the term of coverage ends.
If
you are young, term coverage is remarkably cheap. NerdWallet recently
researched term life premiums for healthy 30-year-olds. It found the following
sample rates for 20- and 30-year term policies valued at $250,000:
30-year-old male: annual premium of $156 for a 20-year term policy, $240 for a 30-year term policy
30-year-old female: annual premium of $141 for a 20-year term policy, $206 for a 30-year term policy
The
downside of term coverage is that you are “renting” the insurance. Just as you
cannot build home equity by renting a house, you cannot build cash value by
“renting” a policy.3
A whole life policy may
become quite valuable.
As Life Happens notes, the average such policy bought at 25, 35, or 45 may have
a guaranteed cash value of anywhere from $100,000-200,000 when the policyholder
turns 65, assuming the policy is kept in force and no loans are taken from it.
Universal life policies permit tax-deferred growth of the cash value.1,2
Make
no mistake, a whole life policy is a lifelong commitment. It must be funded
every year or it will lapse. That should not scare you away from the value and
utility of these policies – the cash inside the policy can often be borrowed or
withdrawn. Sometimes families use cash value to fund college educations or help
with medical expenses or retirement. Such withdrawals can lessen the death
benefit of the policy, but what is left is often adequate. Cash withdrawals
from a whole life policy are usually exempt from taxes, just like the death
benefit.1
Maybe this
is the time to put time on your side. Age-wise, life insurance will never be cheaper
than it is for you today. Getting coverage now – even if you are single – may
be a money-smart move as well as a great life decision.
This material was prepared by MarketingPro, Inc., and does not
necessarily represent the views of the presenting party, nor their affiliates. This
information has been derived from sources believed to be accurate. Please note
- investing involves risk, and past performance is no guarantee of future
results. The publisher is not engaged in rendering legal, accounting or other
professional services. If assistance is needed, the reader is advised to engage
the services of a competent professional. This information should not be
construed as investment, tax or legal advice and may not be relied on for the
purpose of avoiding any Federal tax penalty. This is neither a solicitation nor
recommendation to purchase or sell any investment or insurance product or
service, and should not be relied upon as such. All indices are unmanaged and
are not illustrative of any particular investment.
Securities offered through First Heartland Capital, Inc. Member FINRA/SIPC
Bogetto Financial is not affiliated with First Heartland Capital, Inc.
Bogetto & Associates does not provide legal or tax advice. These topics are discussed in conjunction with your CPA, Tax Advisor and Attorney.
Citations.
1 - cnbc.com/2016/10/17/think-about-life-insurance-sooner-rather-than-later.html
[10/17/16]
2 - lifehappens.org/product-selector/comparing-the-cost-permanent-and-term-life-insurance/
[1/26/17]
3 - nerdwallet.com/life-insurance#basic [1/26/17]
Financial Health...For Now & Tomorrow
Contact us Today
Website - www.bogettoandassociates.com
Telephone - 314-858-1602
Email - peter@bogettoandassociates.com
10805 Sunset Office Drive, Ste. 202
St Louis, MO 63127
Website - www.bogettoandassociates.com
Telephone - 314-858-1602
Email - peter@bogettoandassociates.com
10805 Sunset Office Drive, Ste. 202
St Louis, MO 63127
No comments:
Post a Comment