Imagine standing on the precipice of a deep, treacherous ravine—a place where life’s unexpected twists and turns can push you towards the edge without warning. This ravine represents the uncertainties that lie in wait, posing a threat to your loved ones and their financial security should the unthinkable happen.
Now, picture a safety net, a lifeline that can provide stability and peace of mind, even in the face of tragedy. That safety net is life insurance.
Life insurance is not a topic that typically elicits excitement or sparks immediate attention. It’s far easier to postpone such discussions, avoiding the discomfort of contemplating our own mortality. However, burying our heads in the sand comes at an immense cost—one that can reverberate through the lives of those we hold dear.
However, the reality is that deferring the purchase of life insurance coverage can lead to a Dipping Point – a moment when the cost of insurance coverage can become prohibitively expensive or even unattainable due to age or health conditions.
For example, a 30-year-old non-smoker in good health may be able to purchase a 20-year term life insurance policy with a $500,000 death benefit for as little as $20 per month. However, if that person waits until they’re 40 to purchase coverage, the same policy may cost them $40 per month. And if they wait until they’re 50, the cost may be $100 or more per month.
At some point, the cost of life insurance coverage may become too high to be feasible, leaving individuals and families without the protection they need. This can be especially problematic for those who have dependents or debts that need to be covered in the event of their death.
As we age, our risk of mortality increases and life insurance premiums increase accordingly. And since age and health conditions are the primary factors in insurance coverage calculation which is why, the longer you wait, the closer you will be to the Dipping Point. Additionally, certain health conditions, such as a history of cancer or heart disease, can also make life insurance coverage more expensive or harder to obtain.
Deferring the purchase of life insurance due to the assumption that you are young and healthy and don’t need to worry about it until later in life can be dangerous, as it ignores the potential for the Dipping Point.
How to Avoid Reaching the Dipping Point
To avoid reaching the dipping point, it is important to determine the right time to buy life insurance which depends on your individual circumstances and goals. Here are some tips to consider when deciding when to buy life insurance:
- Early in Life: Purchasing life insurance at a young age can often be beneficial. Premiums are typically lower when you’re younger and healthier, and you can lock in a lower rate for the duration of your policy. Moreover, if you have dependents or significant financial obligations, such as student loans or a mortgage, starting early can provide peace of mind and protect your loved ones in case of unexpected events.
- Major Life Events: Life insurance should be considered during significant life events such as marriage, starting a family, or buying a home. These milestones often bring additional financial responsibilities, and life insurance can help provide a safety net to protect your loved ones’ future financial stability.
- Changing Jobs or Careers: If you’re transitioning to a new job or career, it’s an opportune time to evaluate your life insurance needs. Employer-provided life insurance policies may not offer sufficient coverage, so purchasing an individual policy can ensure continuous protection even during job changes.
- Health Changes: Significant changes in your health can impact your insurability and premium rates. If you develop a health condition or receive a diagnosis, it may be wise to secure life insurance coverage before your health situation potentially worsens.
- Financial Dependency: If you have individuals who depend on your income, such as a spouse, children, or aging parents, it’s crucial to have life insurance to provide financial support in case of your untimely death. Assess your financial responsibilities and ensure that your loved one’s needs will be met if you are no longer there to provide for them.
- Future Financial Goals: Consider your long-term financial goals and how life insurance fits into your overall financial plan. If you aspire to leave a financial legacy, pay for your children’s education, or cover estate taxes, life insurance can serve as a tool to accomplish those goals.
- Regular Policy Review: Even if you already have life insurance, it’s essential to periodically review your coverage to ensure it aligns with your current needs and circumstances. Life changes, such as marriage, divorce, or the birth of a child, may necessitate adjusting your coverage to adequately protect your loved ones.
Remember, it’s advisable to consult with a licensed insurance professional or financial advisor who can assess your specific situation and provide personalized guidance tailored to your needs. They can help you determine the appropriate timing and type of life insurance that best suits your circumstances and financial goals.
We, at FBS Group, have helped hundreds of people understand their life insurance needs and married them into their long-term financial goals. If you are looking for someone to help you navigate through the murky waters of insurance policies, get in touch with us at [email protected] for a free consultation.