Why You Might Not Want to Wait Until You're Married With Children to Get Life Insurance

Should Singles Even Consider Life Insurance?

Ask anyone if a single person without any dependents should get life insurance and you’ll almost certainly be told no. But like most financial decisions, it isn’t as black and white as that. Sure, if you’re just a single 30-something living alone without kids it would seem like buying term life insurance would be a huge waste. After all, who do you have that you can leave money to? You don’t have a spouse or children that depend on your income, so that isn’t an issue. This is all true, but there’s an interesting fact about life insurance that puts people who wait at a significant disadvantage.

It all has to do with the cost of premiums and insurability. In the insurance industry, the older and less healthy you are, the more you pay for insurance. When you think about it, this is common sense. Say a 20-year old wants to buy a 30-year term policy. The insurance company knows that the policy will expire when this person is just 50 years old. Statistics show that the chances of this person dying over the course of this term is quite low. Compare that to a 45-year old looking to buy the same 30-year policy. Now, the insured person will be 75 years old before the policy expires. This person has a much greater chance of dying during the length of the policy so the insurance company charges a significantly higher premium since they are assuming greater risk.

Family

The same situation plays out in terms of your overall health. At 25 you might be in the best shape of your life and have no major medical conditions that have developed yet. So, an insurance company is likely to insure you since you don’t have any major health issues. Again, after another 10 or 20 years go by you may develop any number of health issues that could make you completely uninsurable. What if you waited a few years until you did get married or have kids only to find out that you now can’t give them the protection they need because you’ve developed a health condition that was completely out of your control?

Looking at the Numbers

So, what is the real difference in premium as a typical healthy person ages? I went ahead and ran some quotes for a number of insurers to see what we could come up with. For this I stuck with your standard 30-year level term $500,000 policy at the preferred non-smoking status. Here are the average numbers:

  • 25 year old 30 year term – $525/year or $15,750 total
  • 30 year old 30 year term – $550/year or $16,500 total
  • 40 year old 30 year term – $810/year or $24,300 total
  • 45 year old 30 year term – $1,420/year or $42,600 total

As you can see, there isn’t much difference between age 25 and 30. But look what happens when you let ten years slip by and want to buy the policy when you’re 40. The premium is 47% higher, costing you nearly $8,000 more over the term. Just five more years go by and you’ve nearly doubled that premium costing you more than $18,000 extra. It’s obvious to see how purchasing your term life insurance as soon as it’s appropriate to can save you thousands.

Ever wonder how much term life insurance would cost for you and your family? You can get a free quote.

So, Should a Single Person Buy Life Insurance?

Does this mean a single 30-year old guy should rush out and buy life insurance? Not exactly. You really have to look at your situation and lifestyle to see if is something you may end up needing in the future. For example, if you enjoy single life and never want to settle down with a spouse or have a family, there’s probably no need to buy insurance. But if you’re 30 and in a relationship and hope to finally settle down with someone and have a family in a few years you may want to start looking at your options. As you can see, just waiting 5 years to purchase insurance can make a big difference in how much you ultimately pay, so even if you’re covered for a few years while you aren’t married or have children it could still save thousands of dollars. Or, let’s not forget the worst-case scenario, where some health issue may come up in those few years while you wait and suddenly you can’t get insurance at all, or need to pay a premium so high it isn’t even affordable.

Take a look at your situation and see if it makes sense. If you’re already in a serious relationship and marriage is on the horizon the sooner you pick up coverage, the less you’re going to pay. If you don’t have any prospects of getting married or starting a family, then sure, you may want to spend that money elsewhere. It really depends on you and there’s no right or wrong answer.

Don’t let life insurance get in the way of your other financial goals when single. If you’re burdened with debt, have student loans, or otherwise need all the cash flow available while you’re single, keep that in mind. It isn’t worth saving money on insurance if it’s going to make it take longer to pay off high-interest debt.

But What About Beneficiaries?

If you aren’t married and don’t have kids, what’s the point? Who would you leave the money to? The great thing about life insurance is that you can usually change the beneficiary at any time. So, if you aren’t married yet and still decide to get a policy you can initially put anyone you want down as a beneficiary. Maybe it’s a brother or sister, your parents, another relative, or maybe even your favorite charity. Yes, that’s right, you can list a charity as your life insurance beneficiary. Even if the worst is to happen and you were to die before you do get married or have children you can be sure that your money is going to someone or a cause that you believe in. Then, all you have to do is update your beneficiary once you do decide to get married or have kids. It’s that simple.

Weigh Your Options

It still isn’t going to make sense for everyone, but you should at least take into consideration the increase in premium and total cost of a policy if you wait even a few years. Some situations may warrant the purchase of a policy before conventional wisdom says to, and in many cases the savings won’t be worth it if you’re not in a position to take advantage of it. That being said, insurance is a key component of any financial plan so it requires some serious consideration. Keep in mind that the example we used here was just a simple $500,000 policy with someone in excellent health. Once you start talking about higher coverage limits and health issues the cost difference could be very substantial by waiting just a few years and the savings could literally be in the tens of thousands.

So, if you’re someone who is thinking about the future and has marriage and/or children in the near future, you may want to run some quotes and see what kind of savings could be had by buying a policy early. You may find there’s little or no savings at all, or you could be faced with a decision that could save you thousands of dollars. Either way, it’s always a good idea to take a proactive approach and think about these issues before they happen.

Author: Jeremy Vohwinkle

My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.

10 comments
brad@northwesternmutual
brad@northwesternmutual

This is a great post, Jeremy. It’s always important to consider your long-term goals as soon as possible, married or not. Let’s say, some day, a working woman wants to help protect her future family with a $500,000 term life insurance policy. That policy may be affordable for her today, but since prices generally increase as she grows older, it may not be affordable for her tomorrow. By waiting, she might fall short of meeting her financial goals. By taking action, she could lock in a fixed rate that works with her budget and her vision. In any case, it’s never too early to start considering long-term financial goals, and it’s never too soon to speak with a financial professional about how to achieve them.

Credit Girl
Credit Girl

As a young and a single person, the issue of life insurance never really ever came up because I am still young and healthy. However, this article really helped me weigh the pros and cons of life insurance at a young age and I think that I may have to start considering this once I reach my 30s.

Honey
Honey

I bought a package that has term components but will transition to a whole life policy over the course of years. I bought this when I was 28, not married (though in LTR), no plans to have kids.

Why would I buy life insurance? Why would I buy whole (which I have never seen recommended anywhere)? Because my mom died of a long term illness that is similar to MS or Parkinson's, and I have a 50% chance of having the same. She died when she was 46, so compared to other folks I have a very high chance of being totally uninsurable later (this is also why I am desperate for the health care reform to pass - I want to be able to change jobs, which may mean being unemployed at some stages of my life, and I want to know I would be covered and couldn't be charged more).

I have short- and long-term disability through my work, and also a supplemental disability policy through my life insurance package. I will also get long-term care insurance at some point, but even if I'm unable to get that for health reasons later, I want to know that whatever my medical costs might be, they would be paid for after my debt and my boyfriend (who will be my husband) would not be financially burdened.

DS2009
DS2009

I just wanted to give you a different take on your numbers presented in the article. Basically as you get to the 40 and 45 year thresholds the premium is much more expensive to initiate. However, the 25 or 30 yrs old could have put the money into a 6-8% investment and if allocating 525-550/month would have built up a substantial savings after 20 or 15 yrs respectively.
For a 25 yr old after 20 yrs, when they are 45 they would have saved $33,205 with a 7% growth rate.

This money could then be used to purchase the term life insurance which would take them into later years of their life. I believe that the savings amount would then offset the greater premium for the term life if taken at 45.

Tim Landry
Tim Landry

To the "Young and single - waste of money" concept - I cannot disagree with the initial thought contained in your comment BUT one of the KEY benefits of youth is USUALLY good health. STRONG suggestion - because I have seen that "good health" vanish far too often and ALWAYS unexpectedly: buy a small amount of life insurance now with the largest guaranteed insurability feature you can find - hopefully enough to let you LATER buy AT LEAST $1,000,000 of insurance. This does two things now - one not very important and one PACIFIC OCEAN HUGE - provides life insurance now at a VERY LOW cost and PROTECTS YOUR INSURABILITY FOR LATER so you CAN buy it when you need it. Diabetes is FLOODING the worlld - diabetes virtually guarantees you cannot get "standard" insurance - and insulin dependent diabetes ELIMINATES standard insurance

Tim Landry
Tim Landry

First and foremost - I am NOT a Life Insurance agent - I am licensed to sell it because where I live just having an Accident and Sickness Insurance License is not an option - but I specialize in Disability Insurance - Critical Illness and Long Term Care Insurance. If you buy life insurance thinking you will not need it later in life, you are almost certainly making a HUGE mistake. The people who are the most successful investors are those who need life insurance the most. It is BY FAR the most efficient way to pay whatever taxes fall due on death - to cover the costs related to business transfers - etc. The number of life insurance sales made to people in their 70's and 80's is HUGE - and ALL of these people have been successful in life. If you are NOT successful, you will not need life insurance - BUT IF YOU ARE, YOU WILL.I know (GD DO I EVER) know all the objections to permanent life insurance. YES - term is a cost effective solution while you are raising your kids and growing your estate - but the more successfully you grow that estate, the more you will need permament insurance.

Jeremy
Jeremy

kdice, that's an important consideration, indeed, and something each person would have a different answer to.

You may not need a 30-year term if you wait to buy, but you may also still have insurance needs after say age 55. At that age you still may not have a paid off house, your spouse may rely on your income still, and your children may only just be getting ready for college, etc.

There's no one situation that's the same for everyone, but there's also more to consider than just burial costs, especially if you have outstanding debts such as a mortgage or a non-working spouse.

Craig
Craig

I understand the younger you join the better policies there are but I find there no reason to have any policy if you are young and single.

kdice
kdice

You make an interesting argument, but I'm not sure I agree with one assumption. If you buy a 30 year term at age 25, it will run out at age 55. So if I buy at age 40, do I really need a 30 year term? Or would I be looking for something more like a 15 year term (no idea if it's sold like that)? Is comparing all the 30 year term rates really the right comparison? Or, should we assume that after age 55 you will have enough money to "self-insure" burial, have enough set aside that spouse can live, etc. and we really should compare cost of term up to a certain age? I really don't know the answer here, just struck me as I was reading...

goss
goss

... but it said that you would be paying 525-550 a year, that isn't what you would be paying per month.