Advertisement
insurance

Smart Life Insurance Strategies for Young Buyers

Buy the right life insurance plan now to avoid scrambling to find coverage later.

The decisions you make when you buy life insurance in your twenties or thirties can help you avoid scrambling to find coverage before your term policy expires.

You could buy a permanent life insurance policy and never worry about the coverage expiring. But the premiums are much higher than the premiums for term insurance, and young families who start out with permanent insurance frequently buy too little coverage because that’s all they can afford.

Advertisement - Article continues below

“What we really need to focus on with younger families is the death benefit amount,” says Tim Maurer, director of adviser development for the BAM Alliance, a network of independent financial advisers. A 30-year term policy is also an option, but those premiums can be pricey, too.

A more cost-effective way to extend the coverage is to layer policies, says Maurer. Buy a 20-year term policy for the bulk of your coverage. That allows you to get a death benefit large enough to protect your family while your kids are at home and you’re making mortgage payments. “You want to have all of those years covered, but you might not need that much coverage for the whole time,” Mauer says. If you’d like coverage that lasts longer, you could also get a 30-year term with a smaller death benefit.

Advertisement
Advertisement - Article continues below

For example, a 35-year-old man could buy a $500,000, 20-year term policy for $250 per year and layer $250,000 of 30-year coverage for an additional $260 per year, which would cover him until age 65, says Udell. If you want some permanent coverage, too, you could add $100,000 of guaranteed universal life (GUL), which you can keep for your lifetime, for about $620 per year (whole life would cost about double that). A 35-year-old woman would pay about $215 per year for a $500,000, 20-year term policy and could get a $250,000, 30-year term policy for an additional $226 per year. She could add a $100,000 GUL policy for about $515 per year.

Advertisement

Most Popular

HSAs Get Even Better
Financial Planning

HSAs Get Even Better

Workers have more options with flexible spending accounts, too.
July 2, 2020
Find a Great Place to Retire
happy retirement

Find a Great Place to Retire

Our cities provide plenty of space to spread out without skimping on health care or other amenities.
July 2, 2020
What Are the Income Tax Brackets for 2020 vs. 2019?
tax brackets

What Are the Income Tax Brackets for 2020 vs. 2019?

The IRS unveiled the 2020 tax brackets, and it's never too early to start planning to minimize your future tax bill.
June 20, 2020

Recommended

For Financially Responsible Kids, Do NOT Do These 3 Things
family savings

For Financially Responsible Kids, Do NOT Do These 3 Things

The key to putting your kids on the right financial path can be boiled down into one sentence.
July 1, 2020
10 Tax Breaks for the Middle Class
tax deductions

10 Tax Breaks for the Middle Class

Tax breaks aren't just for the rich. There are plenty of them that are only available to middle- and low-income Americans.
June 30, 2020
Applying for Disability Benefits During a Global Pandemic
insurance

Applying for Disability Benefits During a Global Pandemic

It can take months or even years to get approved for Social Security Disability Insurance (SSDI) benefits in the best of times. Needless to say, now i…
June 24, 2020
The Answers to More RMD Questions
retirement

The Answers to More RMD Questions

The CARES Act made 2020 required minimum distributions optional. But what are your next moves?
June 12, 2020