A:

There's really no pre-determined age when it suddenly becomes necessary to take out a life insurance policy. However, if there are people who depend on your income - especially children or a spouse - there's a major benefit to taking out a policy when you're young. When you take out a policy in your 20s or 30s, the provider takes into account that you're paying premiums for a number of years when, statistically, there's relatively little risk that they'll have to pay out. Unfortunately, that risk goes up a little with each passing year. It stands to reason that younger policyholders can lock in lower premiums than the aged.



However, it doesn't necessarily follow that every 25-year-old should run out and get insurance. From a financial standpoint, it really doesn't make sense unless you already have dependents. Even if the policy has an investment component - as is the case with whole life products - much of the premium is going toward insurance that you don't really need. You're probably better off putting that money directly into an investment account.



RELATED FAQS

  1. How do insurance companies use a whistleblower?

    Read about the practice of whistleblowing to help insurance companies detect and prevent fraudulent insurance claims or recoup ...
  2. How is maintenance of standard of living for survivors accomplished in estate planning?

    Understand what elements of an estate plan can assist in creating certainty for survivors that allows them to maintain their ...
  3. What options strategies are best suited for investing in the insurance sector?

    Learn how executing the covered call option strategy helps investors profit from the relative stability exhibited by the ...
  4. Why should value investors consider the insurance sector?

    Discover why value investors should consider the insurance sector. Value investors look for extremes in valuation and sentiment ...
RELATED TERMS
  1. Automatic Premium Loan

    An insurance policy provision that allows the insurer to deduct ...
  2. Cestui Que Vie

    The individual who is the beneficiary of a trust or insurance ...
  3. Classified Insurance

    Insurance coverage provided to a policyholder that is considered ...
  4. Guideline Premium And Corridor Test (GPT)

    A test used to determine whether an insurance product can be ...
  5. Cash Value Accumulation Test (CVAT)

    A test method used to determine whether a financial product can ...
  6. Noncancellable Insurance Policy

    A life or disability insurance policy that an insurance company ...

You May Also Like

Related Articles
  1. Investing Basics

    Which insurance companies pay the highest ...

  2. Entrepreneurship

    Want To Sell Life Insurance? Read This ...

  3. Stock Analysis

    Genworth Looking At A Lot Of Heavy Lifting

  4. Stock Analysis

    Even Near A 52-Week High, MetLife Seems ...

  5. Stock Analysis

    Ace Limited Sees Growth In Asia And ...

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!