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.
Steve Kobrin, LUTCF
The firm of Steven H. Kobrin, LUTCF, Fair Lawn, NJ
Although this answer may sound surprising, it is nonetheless valid: you should get life insurance when you are an infant. There are certain cash value life insurance products that are designed to accumulate significant amounts of cash over the long term. When taken out on the life of somebody a year old or less, they can perform extremely well over the course of decades. Their guaranteed cash rates are especially competitive. That cash will come in handy when the child grows up and wants to buy a house or start a business. Plus, the child will have the added advantage of being insured when they enter adulthood. If, unfortunately, they develop a medical condition, or take on a lifestyle risk such as rock climbing, they will be grateful to not have to pay the higher rate for a new policy.