I believe that one should at least entertain the thought of a flexible life insurance policy regardless of whether you have a child, life partner or spouse. I am aware that this contradicts main stream advice, but there are two main reasons, both of which were the basis of my decision to buy life insurance on my child, Cost and Insurability.
You Can’t Always Get Adequate Life Insurance
Everyone assumes that when you are able to start that family, when someone depends on your income, when you get that mortgage, etc., you’ll just go out and buy some life insurance. This isn’t always possible.
Two quick very personal and recent examples:
- I have a childhood friend who was diagnosed with type 1 diabetes when we were 19. Within the last 18 months he decided it was time (read: was pushed into it kick and screaming) to get some life insurance to protect his wife and child.
- I also have an amazing friend (one of my only friends that knows my domain here why do you think I had to use the word amazing) that was just diagnosed with a medical condition that is likely to sideline any life insurance purchase for years. He is single but is highly likely to find his Wife one day and have tons of well dressed children
Unfortunately for friend #1 his TERM life insurance costs 6x the amount of mine because of his health. For friend #2 he is in the same industry as me and I know he has plenty of life insurance for his future wife and children regardless of whether he can ever buy any more. Who do you think is happier about their insurance decisions?
Just because you don’t “need” the death benefit portion (we won’t get into building a stream of income with the cash value in this post) today doesn’t mean you won’t need it later, and the option may not be there when the death benefit need does come up.
Life Insurance is Never as Cheap As Yesterday
If all things are equal (i.e. you don’t fall into the above paragraph or you don’t lose or gain 25 pounds) life insurance will almost always be cheaper on a younger person. I get the fact that there is an opportunity cost but with term insurance being so inexpensive what really is that opportunity cost?Even at 26 I was getting a flexible $250,000 death benefit for $20 something bucks a month.
Eventually you will have to bite the bullet (bad pun) and purchase it so why not start a bit earlier when it is cheaper?
What Type of Insurance Should a Single Person Purchase?
If I had to do it again I would probably tell 24 year old Evan to purchase:
- a term policy that was flexible OR
- a blended whole life policy that was flexible and allowed for guaranteed increases.
Why those two types of policy?
Inexpensive – Lets face it divesting one’s self of much needed funds for non-fun or non-essential needs is not going to be an easy decision to make. So the cheaper it is the less effect it will have on a younger person’s cash flow.
Flexible – A lot of these policies will come with riders that allow you to increase or decrease the death benefit amount. So if you determine you are going to have 12 children with a massive mortgage you can increase your death benefit significantly without having to be tested again. Alternatively, you end up having no mortgage and no children you can limit the amount of insurance you need.
Did you purchase insurance before you had a spouse/partner and/or children? Or are you like me and the rest of America and waited till you actually needed it?