For many, entering your 30s is a time of significant change and new responsibilities. Whether you’re starting a family, buying your first home, or advancing in your career, each will inevitably increase one’s financial obligations which should be considered in one’s future planning. One way to do that is by purchasing a life insurance policy.
In this article, we’ll discuss some of the benefits of getting life insurance in your 30s, how it works, and how to choose the right policy for your needs. As well as discuss whether or not it makes sense for someone in their 30s to purchase a policy at all.
Understanding Life Insurance
Life insurance is a type of insurance policy that provides financial protection for your loved ones in the event of your death. When you purchase a life insurance policy, you pay premiums to an insurance company. In exchange, the insurance company agrees to pay a death benefit to your beneficiaries if you pass away while the policy is in force.
The purpose of life insurance is to provide financial support for your loved ones in the event of your untimely death. The death benefit can be used to cover expenses such as funeral costs, outstanding debts, and living expenses. Life insurance can also help provide financial security for your loved ones, ensuring that they can continue to maintain their lifestyle and cover ongoing expenses.
Common reasons to buy life insurance
There are several reasons why someone might choose to purchase life insurance. Here are some of the most common reasons:
- Provide financial support for loved ones: Life insurance can provide a financial safety net for your loved ones if you were to pass away unexpectedly. The death benefit can help cover expenses such as funeral costs, outstanding debts, and ongoing living expenses.
- Pay off outstanding debts: If you have outstanding debts such as a mortgage, car loan, or credit card debt, life insurance can help ensure that these debts are paid off if you were to pass away. This can help prevent your loved ones from having to take on these financial obligations.
- Cover education expenses: If you have children or other dependents who are planning to attend college or pursue higher education, life insurance can help ensure that they have the financial resources to do so, even if you’re no longer around to provide for them.
- Provide for business continuity: If you own a business, life insurance can help ensure that the business can continue to operate and provide for your employees and their families in the event of your untimely death.
- Serve as an investment vehicle: Permanent life insurance policies have a cash value component that grows over time. This can serve as an investment vehicle, allowing you to borrow against the cash value or withdraw it if needed.
- Peace of mind: Knowing that you have life insurance coverage in place can provide peace of mind, knowing that your loved ones will be taken care of if something were to happen to you.
Ultimately, the decision to purchase life insurance is a personal one that should be based on your individual needs and circumstances.
Two main types of life insurance
There are two main types of life insurance: term life insurance and Whole life insurance.
Term life insurance
Term life insurance provides coverage for a specific period of time, such as 10, 20, or 30 years. If you pass away during the term of the policy, your beneficiaries receive the death benefit. Term life insurance is typically more affordable than permanent life insurance and is often a good option for people who want coverage for a specific period of time, such as while their children are young or while they’re paying off a mortgage.
- Affordability: Term life insurance is generally more affordable than permanent life insurance. This can make it a good option for people who want coverage for a specific period of time, such as while their children are young or while they’re paying off a mortgage.
- Simplicity: Term life insurance policies are generally straightforward and easy to understand. There are no cash value components or investment options, so you don’t have to worry about complicated policy features.
- Flexibility: Term life insurance policies can be customized to fit your needs. You can choose the length of the policy term, the amount of coverage, and the beneficiary.
- No medical exam option: Some insurance companies offer term life insurance policies that don’t require a medical exam. This can make it easier to get coverage if you have health issues.
- No cash value: Unlike permanent life insurance, term life insurance policies don’t have a cash value component. This means that you can’t borrow against the policy or use it as an investment vehicle.
- Coverage limits: Term life insurance policies have a specific term and coverage amount. Once the term expires, you may need to purchase a new policy or renew the existing policy, which can be more expensive.
- No guarantee of renewal: Some term life insurance policies may not be renewable or may require a medical exam to renew. This means that if your health has deteriorated, you may not be able to renew your policy or may have to pay higher premiums.
- Limited coverage options: Term life insurance policies are generally limited to death benefit coverage. If you want additional coverage options, such as long-term care or disability coverage, you may need to purchase additional policies.
Whole life insurance
Whole life insurance, as the name suggests, provides coverage for your entire life. In addition to the death benefit, permanent life insurance also has a cash value component. This means that a portion of your premium payments goes toward building cash value, which you can borrow against or withdraw if needed. Permanent life insurance is typically more expensive than term life insurance, but it provides lifelong coverage and can also serve as an investment vehicle.
- Guaranteed death benefit: Whole life insurance provides a guaranteed death benefit, which means that your beneficiaries will receive a payout when you pass away, regardless of when that happens.
- Cash value component: Whole life insurance policies have a cash value component that grows over time. This cash value can be borrowed against or used to pay premiums, or it can be surrendered for its cash value.
- Tax-deferred growth: The cash value component of a whole life insurance policy grows tax-deferred, which means that you don’t have to pay taxes on the growth until you withdraw it.
- Fixed premiums: Whole life insurance policies have fixed premiums, which means that you pay the same amount each year, regardless of your age or health status.
- Higher premiums: Whole life insurance premiums are generally higher than term life insurance premiums. This can make it more difficult to afford coverage, especially if you’re on a tight budget.
- Limited flexibility: Whole life insurance policies are less flexible than term life insurance policies. You can’t adjust the coverage amount or policy term, and you may have limited options for borrowing against the cash value.
- Lower investment returns: The investment returns on the cash value component of a whole life insurance policy are generally lower than other investment options, such as mutual funds or stocks.
- Complexity: Whole life insurance policies can be complex and difficult to understand, with a variety of policy features and riders that can affect the cost and coverage.
Determining coverage needs
Determining how much life insurance to buy in your 30s can depend on several factors, including your income, debt, dependents, and future financial goals. Here are some guidelines to consider:
- Income replacement: A general rule of thumb is to purchase enough life insurance to replace your income for a certain number of years, typically 10-12 times your annual income. For example, if you earn $50,000 per year, you may want to consider purchasing a policy with a death benefit of $500,000 to $600,000.
- Debt: Consider any outstanding debt you have, such as mortgages, car loans, or student loans, and how much you would need to pay off those debts if you were to pass away. This can help you determine the minimum amount of coverage you need.
- Dependents: If you have dependents, such as children or aging parents, consider how much financial support they would need if you were no longer around. This can include expenses such as child care, education, or healthcare.
- Future financial goals: Consider your future financial goals, such as retirement or saving for your children’s college education, and how much you would need to save to achieve those goals.
It’s important to remember that everyone’s situation is unique, and the amount of life insurance you need may vary depending on your individual circumstances. You can use our calculator below to get an idea of how much term life insurance you may need.
Your total cost for years of retirement at per year is:
Assuming you retire at age , you have investing years left. Using a annual rate of return for your investments, you're expected to earn a total of .
Life Insurance Rates Ages 30-39
The following quotes for ages 30-39 are from the best life insurance companies that we at IBUSA represent.
Life insurance application process
The life insurance application process typically involves the following steps:
- Determine your coverage needs: Before applying for life insurance, determine how much coverage you need based on your financial situation, future goals, and any dependents you may have. This will help you choose the right policy for your needs.
- Research insurance companies: Look for insurance companies that offer policies that meet your coverage needs and have a good reputation for customer service and financial stability.
- Choose a policy and fill out an application: Once you have selected an insurance company and policy, fill out an application. This typically involves providing personal information, such as your name, age, gender, occupation, and medical history. You may also be required to undergo a medical exam, depending on the policy and your age.
- Underwriting process: After submitting your application, the insurance company will review your application and assess your risk level based on factors such as your age, health, and lifestyle habits. This is known as the underwriting process.
- Medical exam: Depending on the policy and your age, you may be required to undergo a medical exam. This exam typically involves a physical examination, blood and urine tests, and a review of your medical history.
- Policy approval and premium payment: If your application is approved, the insurance company will provide you with an offer and premium payment options. You can choose to accept or decline the offer.
- Signing the policy: If you accept the offer, you will sign the policy and make your first premium payment. This officially starts your coverage.
- Ongoing payments: You will need to make ongoing premium payments to keep your policy in force. Failure to make payments can result in the cancellation of your coverage.
It’s important to note that the application process can vary depending on the insurance company and the policy you choose. Some policies may not require a medical exam, while others may have a simplified application process that does not require as much medical information. Be sure to carefully review the policy details and application requirements before applying for coverage.
No medical exam life insurance options
If you’re looking for life insurance coverage but prefer to avoid a medical exam, there are several options available. The popular type for those in their 30s is commonly referred to as a simplified issue life insurance policy which will rely primarily on data collection vs. a medical exam.
Simplified issue life insurance policies
Simplified issue life insurance policies are a type of life insurance policy that offers coverage without requiring the applicant to undergo a full medical exam. Instead, the application process for simplified issue policies typically involves completing a medical questionnaire or answering a series of health-related questions.
Coverage amounts for simplified issue policies are typically lower than traditional policies and the premiums may be higher depending upon your health status. However, the application process is generally faster and easier, and coverage can be approved in as little as a few days as opposed to several weeks or months.
It’s important to note that while simplified issue policies do not require a full medical exam, they may still require some basic medical information. This can include questions about your medical history, current medications, and any recent hospitalizations. Applicants who have serious health conditions or a history of significant medical issues may not be eligible for simplified issue policies. Overall, simplified issue life insurance policies offer a convenient and accessible option for individuals who want to obtain life insurance coverage without undergoing a medical exam.
If you’re considering a simplified issue policy, be sure to carefully review the policy details and compare coverage and premiums across different policies to ensure that you choose the right coverage for your needs.
What additional benefits can life insurance offer me?
Buying life insurance in your 30s can also offer additional benefits to an insured if their careful and due their due diligence when determining “which” life insurance company they choose to work with.
This is because…
There are a lot of additional features (or riders) that one can add to a traditional term or whole life insurance policy that can be quite beneficial to an insured while they are alive.
That can be added to a life insurance policy at very affordable rates instead of purchasing them separately in a “stand-alone” policy later in life. For this reason, we want to mention a few of the most common “living benefit” riders offered and briefly describe what they are and how they may be beneficial to you and your family.
Optional living benefits may include:
Disability income rider.
A disability income rider is an add-on available on some insurance policies that would allow the insured to receive a monthly payment if one becomes injured and cannot work for some time (possibly permanent).
Terminal Illness rider.
A terminal illness rider is an add-on that is available on some term or whole life insurance policies that will allow an insured to access some of their “death benefit” funds while still alive and battling their disease. Qualifying medical conditions will vary but will usually require one to be diagnosed with some terminal illness. In cases like these, the insruance company will likely not act until it is assumed that the insurance is not likely to live beyond six to twelve months.
Critical Illness rider.
A critical Illness rider would allow a living insured to collect a portion of their life insurance policy to pay for unexpected medical expenses that may arise due to a medical emergency in which one is expected to survive. Examples of such emergencies may include suffering from a heart attack or a stroke, being diagnosed with cancer. In some cases, severe injuries may also qualify.
A Chronic illness rider.
A chronic illness rider will provide many of the same benefits as a critical care rider, only in this situation, the qualifying event that would allow you to receive your benefit would be different in that this rider is designed only to “kick in” when someone is suffering from a “chronic” illness which is unlikely to be cured or cause one to die soon.
Now the really tricky part…
For most 30 years olds, is that when it comes time to consider whether or not one of these “additional options” might be worth it or not, it’s difficult to imagine oneself as getting old and needing any of these benefits later in life. Especially if you’re really healthy now and have never experienced any kind of “health scare”.
For this reason…
We’ll usually recommend that they take a look at their family members and see if any of them would have benefited from owning a living benefit in their lives and then see if the additional cost of adding a living benefit to your policy sense.
Is it really worth it to buy a life insurance policy in your 30s?
At the end of the day, you’re the only one that’s going to be able to decide whether or not it’s worth it to you to purchase a life insurance policy in your 30s.
But to help you decide, here are a few of the advantages and disadvantages of buying life insurance in your 30s that you should consider:
- Lower premiums: Life insurance premiums are typically lower when you’re younger and in good health. By purchasing a policy in your 30s, you may be able to lock in lower premiums for the duration of your policy.
- Protection for loved ones: If you have dependents or loved ones who rely on your income, life insurance can provide financial protection in the event of your unexpected death. This can help ensure that your loved ones are able to maintain their standard of living and cover expenses like housing, education, and other bills.
- Peace of mind: Knowing that you have life insurance coverage can provide peace of mind, especially if you have young children or other dependents who rely on your income.
- Expense: While life insurance premiums may be lower when you’re younger, it’s still an expense that you need to budget for. If you’re on a tight budget, it may be difficult to afford the premiums for a life insurance policy.
- Coverage limits: Term life insurance policies, which are often the most affordable type of life insurance, may have coverage limits that are lower than what you need. If you need a higher coverage limit, you may need to pay higher premiums or consider a different type of policy.
- Limited benefits: Life insurance policies only provide benefits in the event of your death. If you’re looking for a policy that offers other benefits, such as savings or investment options, you may need to consider a different type of policy.
Overall, buying a life insurance policy in your 30s can be a smart financial decision, especially if you have dependents who rely on your income. However, it’s important to carefully consider your budget and coverage needs before purchasing a policy, and to shop around to find the best policy for your situation.
What if life insurance were free?
When considering whether to purchase a life insurance policy, we often pose a simple question to those who are unsure:
“If life insurance were free, would you want to have it for your family?”
If the answer to this question is “YES” then, we’re no longer discussing whether or not you would like to provide insurance for your family, we’re now discussing how much you would be willing to pay.
This is why, we always recommend that anyone who is considering purchasing a life insurance policy for themselves, first find out how much it will cost before making any decisions. After all, you may discover that it’s really quite affordable, and choosing not to get insured really doesn’t make much sense.