Although it’s been around for centuries, many people still see life insurance as vital to their families' long-term financial security. According to Statista, 52% of Americans owned life insurance in 2021. This research shows that 37% of policyholders said they bought life insurance to replace their income if they died, while 30% said they purchased it to pay for burial or other final expenses. However, can anyone buy life insurance at any age?
Jump ahead to these sections:
- Is There a Minimum Age for Buying a Life Insurance Policy?
- Why Is There a Minimum Age for Buying Life Insurance?
- What Types of Life Insurance Don’t Have a Minimum Age Requirement to Purchase?
- What’s the Best Age to Buy a Life Insurance Policy?
- Common Milestones for Buying Life Insurance
- What’s the Best Type of Life Insurance to Buy?
- What If I Don’t Qualify for a Life Insurance Policy?
Considering how many people own life insurance, there are still many questions people frequently ask about buying it, such as how much life insurance they can buy, how much it costs, and where to get it. It can be tricky to navigate this process, especially if you’ve never purchased a long-term insurance policy before.
With that in mind, what’s the minimum age for buying life insurance? This article will answer that question, look at the age requirements for different types of policies, and consider what the right age is for someone to buy life insurance (if there is one). Life insurance, like most things in life, is far from one-size-fits-all. Here’s what you need to know.
Is There a Minimum Age for Buying a Life Insurance Policy?
To get right to the point, yes, there is a minimum age requirement for life insurance. This was put in place by life insurance companies as a way to regulate the industry.
Life insurance companies that sell individual policies for children typically require the child to be at least 14 days old before they will issue a policy. Though this age might seem random to industry outsiders, it’s a very intentional number. It was put in place for a reason.
Why Is There a Minimum Age for Buying Life Insurance?
What’s the reasoning behind the 14-day rule? Life insurance companies impose this minimum age requirement for their own financial protection. Unfortunately, newborns face many health challenges and concerns. Newborn mortality can be uncertain, and this is why this age requirement is in place.
With the average cost of a funeral for a child being anywhere from $7,500 to $10,000 or more, insurers aren’t willing to assume that amount of financial risk on a newborn until the baby has passed the critical stage of childbirth. It’s not in their best interests financially to collect one very small premium and assume the risk of paying a claim immediately after an infant is born.
For that reason, they’ll wait 14 days before they evaluate a newborn's health and decide on issuing a policy. After this period, most newborns have fewer health concerns and are a safer life insurance investment.
What Types of Life Insurance Don’t Have a Minimum Age Requirement to Purchase?
While there’s a minimum age requirement for life insurance, is this true for all types of insurance? The answer is simple: yes.
All types of life insurance have a minimum age requirement: child life insurance, term life insurance, whole life insurance, burial or final expense insurance, etc. No matter what policy you choose and your situation, you need to consider the minimum age requirement before you’ll be approved for purchase.
What’s the Best Age to Buy a Life Insurance Policy?
Now that you know the minimum age requirements for life insurance, when is the right time to buy your policy? While deciding what type of life insurance you should buy is a big decision, deciding when is equally important.
When you’re young, it’s easy to think you have plenty of time before you need life insurance. You have other, more pressing needs, like buying a home, car, furniture, and all of the other things that consume your income when you’ve recently graduated and are in your 20s.
Still, life insurance companies will tell you that’s the perfect time to purchase life insurance. Statistically, you’ll never be as healthy as you are when you’re young, and your life insurance premiums will never be cheaper. Your health condition directly impacts your insurability and your cost of life insurance.
For example, a healthy 25-year-old can find a 20-year term life insurance policy with a face amount of $100,000 for about $10 per month. It makes sense to take advantage of these low rates before you’ve developed any health conditions (age-related or otherwise). Illness and accidents happen to people of all ages, and this can provide your family with much-needed relief.
Common Milestones for Buying Life Insurance
If you’re still uncertain when to buy life insurance, many people choose to wait until they reach specific life milestones. Here are six that you might consider valid reasons for purchasing a policy. Again, remember there is no one-size-fits-all. You might discover now is the right time, and that’s okay too.
You get married
First, most people think about life insurance when they get married. Getting married means assuming responsibility for the well-being of someone besides yourself. Most couples combine their incomes when they get married and become dependent on both paychecks to meet their financial needs.
Life insurance serves to replace the income of a spouse that passes away. It allows the surviving spouse to maintain their current lifestyle, pay off debts accumulated as a couple, take time off from work while grieving, pay for the funeral and other final expenses of the deceased spouse, and provide money for other needs they may have.
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You have children
Similarly, having children creates an entirely new set of financial responsibilities. Your costs to raise a child are substantial, including food, clothing, childcare, medical and dental expenses, hobbies and activities, education, etc.
When a parent who is responsible, fully or partially, for these expenses dies, another parent or guardian will have to assume complete responsibility for the child or children’s financial needs. Life insurance provides a lump sum of money for a surviving parent or a guardian to continue to meet the needs a child has until they graduate college or become financially independent.
You buy a new home
Probably the most significant investment you and your spouse will ever make together is purchasing a home. Few things are as exciting as getting the keys to a new home. That is, until the first mortgage payment is due!
Purchasing a life insurance policy with a face amount large enough for their surviving spouse to pay off the mortgage is perhaps the biggest motivator for many people who buy life insurance. They want their spouse to rest assured that they won’t be forced to move if their partner, who also helped make the mortgage payment, passes away.
Life insurance provides a lump sum death benefit that a surviving spouse can use to pay off a mortgage balance, ensuring that they and their children can remain in their home and not have their life uprooted by forced relocation. This can be healthy emotionally for all of the survivors, who won’t have to leave their home, neighborhood, or community while they work through the grieving process.
A loved one co-signs on a loan
Whether it be a car loan, student loan, or any other type of loan, someone cosigning on a loan with you indicates it’s a good time to buy life insurance. Without life insurance, your cosigner will be responsible for paying the remaining loan balance if you die before the loan is paid in full.
While not required for any loan agreements, this is something to think about. What’s your long-term plan for paying this loan in full?
You’re starting a business
Many important decisions come with starting a business, including purchasing life insurance. If you have a business partner, both partners should buy life insurance to ensure their surviving family members receive cash for their ownership portion.
For example, a life insurance policy on Partner A’s life will pay a death benefit to Partner B if Partner A dies, allowing Partner B to buy their deceased partner’s share of the business from the decedent’s heirs. Everyone wins: Partner A’s family gets a check for selling the percentage of the company they inherited (if they want to sell), and Partner B can breathe easy knowing they won’t have any new inexperienced or unwelcome business partners.
It’s an employee benefit
Lastly, if your employer offers life insurance as an employee benefit, applying for coverage almost always makes sense. Most group life insurance is issued regardless of your health history, up to a specific limit (typically $50,000 of coverage). Many employers will often pay part or all of their employees' group life insurance premiums.
What’s the Best Type of Life Insurance to Buy?
There are several different kinds of policies to consider when you’re younger and buying life insurance: term life insurance and whole life insurance. Let’s take a look at each so you can determine which is best for you.
Term life insurance
To begin, term life insurance is the least expensive type of coverage you can buy when you’re younger. Term life only offers protection for a predetermined period of time, such as 5,10, or 20 years. It strictly provides a death benefit to your beneficiary if you die during the policy term. There is no cash value accumulation within a term life policy.
Though term insurance is appealing because it costs quite a bit less than other types of life insurance, there is a risk to buying term life that you should consider. The risk is that if you outlive the policy’s term, the policy will expire and no death benefit will be paid to anyone. In addition, none of the premiums you paid can be recovered.
Also, consider that by the time the policy’s term expires, your health may have changed for the worse, and you may not be able to qualify for another life insurance policy. However, some term policies carry a guaranteed insurability option, which gives you the chance to convert your term policy into a permanent type of life insurance that won’t expire before you die, like whole life or universal life insurance policy.
It’s a good idea to talk with a life insurance agent when you’re shopping for term life. They can help you find this type of policy and also help determine how much life insurance you may need.
Whole life insurance
On the other hand, whole life insurance is more expensive than term insurance, but it has several advantages. First, whole life insurance builds cash value. Part of every premium dollar you pay is deposited into the cash value component of your policy.
The cash value is credited interest regularly at a rate set by the life insurance company, and some insurers will also add dividends to your cash value, depending upon their profitability for a given year. Second, whole life insurance won’t expire. Unlike term life insurance, which only covers you for a predetermined period, your whole life policy will protect you for as long as you live and pay your premiums.
Last, your premiums will never increase. Regardless of how long you live or how your health condition changes, the premiums for your whole life policy will always remain the same.
What If I Don’t Qualify for a Life Insurance Policy?
The longer you wait to buy life insurance, the greater the probability that your health will change for the worse, and you’ll either be charged a much higher premium for a life insurance policy, or the life insurance company will decline to issue you coverage.
If you’re unable to qualify for a standard term or whole life insurance policy, you do have an option: guaranteed issue life insurance.
Guaranteed issue life insurance is precisely what the name implies. It’s life insurance that an insurer guarantees that they’ll issue you, regardless of your pre-existing health conditions or current health status. They won’t ask you for any medical history, and they won’t require you to have a medical examination. You simply fill out the paperwork, and your policy will be issued.
Guaranteed issue policies typically offer limited death benefit amounts from $2,000 to $25,000, though a few insurers will issue policies with face amounts of $50,000 or more. Guaranteed issue policies also have a “graded death benefit,” meaning that your beneficiary will only receive a partial payment of the death benefit if you die during the policy’s first two or three years.
For example, if you bought a guaranteed issue policy and died six months after you purchased the policy, your family will receive only the amount of premiums you paid, plus a small amount of interest. How long it takes to get a life insurance payout will vary by insurer.
As you can probably imagine, guaranteed issue policies are the most expensive on the market. Life insurance companies take on a considerable financial risk without knowing much about you. However, they do know you’re buying this type of policy because it’s almost certain you’re not in the best of health, and the high premiums they charge for these policies reflect that.
Get Professional Guidance on Life Insurance
If you’ve read this far, you’re probably in the market for a life insurance policy for yourself or a family member. You can get quotes for life insurance online and even complete an application on many websites.
However, consider consulting an independent life insurance agent or trusted financial advisor before you buy. They can talk with you about your financial situation and make recommendations based on your specific needs.