When is a good time to get life insurance?
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Asked July 21, 2010
The answer to your question depends on what type of life insurance policy you are talking about. There are 3 basic types of coverage, and each one would need to be purchased at different times. Look at your situation and the options available and then make a choice of which one is best for your needs.
Term life insurance is most often purchased to make sure that a specific debt or event will be paid for even if the policyholder passes away. This type of policy lasts for a specified length, called a term, and then expires or must be renewed. It doesn't make much sense to purchase a term life insurance to pay for a mortgage you haven't secured, but it is a great idea to take out a term life policy to pay for your kids' college tuition while they are still young, because you never know when your day will come. A rule of thumb for a term life policy is take out the policy as soon as the financial risk it is meant to protect becomes a part of your life, whether that be a newborn child, a new home, or even the purchase of a recreational vehicle.
Cash value life insurance is a form of whole life that works similarly to a term life insurance policy. The policy will out a specified amount if you die, and has the potential to mature while you are still alive, paying you the cash value of the policy. If you can show an insurable risk in your early 20's a policy of this type could turn into a nest egg for your golden years. Cash value policies are one of the most expensive types of life insurance because of the guaranteed payout.
Whole life insurance should be purchased early in life, if possible. A whole life insurance policy, in addition to the death benefits, allows the policyholder to interact with the premiums invested, controlling the investments or even borrowing directly against the accrued value of the policy. This type of policy is recommended for people in their 30's and 40's, but it is important to understand that the sooner the policy is set up, the sooner the policyholder will have access to the funds it provides.
Answered July 21, 2010 by Anonymous