What's the right age to take out life insurance?
Few of us like to contemplate our own deaths, but is an inevitable fact of life, and one that can be financially disruptive and even devastating to the ones you leave behind. That's why, since the 18th century, Britons have been insuring their own lives, paying instalments in life so their survivors can receive a financial windfall or simply support after their deaths.
Just under half of all Britons have some form of life insurance policy, some provided through their employers and some linked to mortgages. These policies can pay out a lump sum or monthly income to survivors, pay off the outstanding balances on mortgage, replace the salary of the deceased, or at the very least, cover the expenses of a funeral, which regularly run over £4,000.
But at what age should you start reckoning with your mortality and making provisions for a future without yourself? You can earn cheaper life insurance premiums by taking out a policy when you're young, but it's also unlikely you have the financial and personal obligations to require life insurance at that point. Additionally, most life insurance products sold as term policies, these policies may expire before you most need them. So what's the magic age?
In This Guide:
- Premiums based on age
- Why aren't young people taking out insurance?
- The ideal age to take out insurance
- Taking out a mortgage
- Starting a family
Premiums based on age
Life insurance is age-banded, meaning your costs rise as you pack on the years, as your likelihood of death increases and your risk to the insurer swells. The younger you are when you seek out insurance, the lower premiums you'll pay-and with most policies these will remain fixed throughout the lifetime of the policy. Secure insurance in your early 20s, and you can lock in average premiums as low as £15 per month and keep paying those into your 40s or 50s.
Why aren't young people taking out insurance?
Despite the financial benefits, few young people are taking out life insurance policies. Perhaps we all feel invincible or immortal in our early 20s But additionally, young people have few financial and familial responsibilities, especially as the ages of buying a home and having children-two life events that often prompt people to take out life insurance-have increased. Britons are now 30 years old, on average, when they purchase their first home, up from just 23 in 1960. In 2014, just 36% of Britons age 25 to 34 owned homes, a significant reduction from the 67% who did in 1991.
Meanwhile, first time mothers now average 28.8 years of age, up from a year from just a decade ago. The average age men become parents has been creeping up too, rising to 33.4 for all fathers in 2017. As we delay starting families in the UK, we also delay purchasing the life insurance policies to provide for them after our deaths.
Additionally, millennials are coping with lower incomes and higher living expenses, including the high costs of renting and student loans, that make the additional expenses of life insurance less practical.
In fact, only 18% of millennials (those born between the early 80s and mid-90s) hold life insurance.
The ideal age to take out insurance
Most financial experts recommend you take out insurance before you reach 35. Premiums, as well as health problems, rise sharply after that threshold. Even if you don't yet own a home or have children at that age, you'd do well to secure a policy early and lock in lower premiums, which you'll be grateful for when you do have a mortgage, garden, and 1.8 ankle-biters.
Wait too long to buy insurance and you'll not only face higher monthly bills, your options for coverage will be more limited. Some life insurance providers won't extend coverage to those over 65 or will only for shorter terms. You might have to take out a type of specialist life insurance policy called over 50s cover. You can't be rejected from these policies, either for age (under a certain maximum) or health conditions and the payout is both fixed and guaranteed whenever you die. But the sums insured are often much lower: they're typically used just to cover funeral expenses, not to provide for a family following your death.
Conversely, you don't want to jump the gun and take out coverage too early in life either. Most life insurance policies are term products, running for 20, 25, or 30 years. Purchase one in your early 20s and it could expire in your 40s, long before your familial and financial commitments have lapsed-while you still have mortgage payments to make and while your children are still living under your roof. You might then be compelled to seek out another policy, and this time with the steeper premiums earned by your more advanced age.
Aim to own life insurance before 35. But life circumstances will often make the decision for you, making insurance an indispensable expense. Below, we'll take a look at the common life events that prompt consumers to seek out life coverage.
Taking out a mortgage
A home is likely the largest purchase you'll ever make, committing you to decades of monthly payments, at an average of £669 across the UK. Many people take out life insurance policies when they buy a property with a partner, especially if they are the main breadwinner and their salary pays the mortgage, to protect your family's home and asset in all worst case scenarios.
Life insurance policies can either deliver a lump sum that will allow a surviving partner to pay off a mortgage following a policyholder's death or an income that will enable them to continue making mortgage payments.
If you're obtaining a joint mortgage, many mortgage providers require you take out a decreasing term life insurance policy as a condition of your loan. These policies will pay off the remaining balance on the mortgage if one partner dies, ensuring the surviving partner and any children can remain in the home and that the lender can get back their money.
Starting a family
Having children shifts your priorities. Providing for these small beings under all circumstances, including the death of one of both parents, will likely become imperative for you. Many first-time parents go straight from the hospital to an insurance broker or life insurance comparison site, to find the peace of mind that should the worst happen, their child will be looked after.