I bought a $500,000 life insurance policy at age 25 and I'd recommend every 20-something do the same
- Four years ago, I bought a $500,000 term life insurance policy. At the time, I was 25 years old.
- Becoming a new dad and recent homeowner were two events that influenced my decision to get life insurance at a young age.
- Buying life insurance in my mid-20s also saved me money because it allowed me to lock in a tremendous rate.
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For many people, life insurance doesn't cross their radar until they've reached their 30s. But I bought my life insurance policy four years ago - at the ripe old age of 25.
And I've never regretted the decision.
In fact, if I had it to do over again I would have taken out my policy sooner. Here are the factors that led me to take out a life insurance policy at age 25 and why I'm glad I did.
1. I had just become a dad
When my wife gave birth to our first son in March of 2015, everything changed. I suddenly had this great sense of responsibility. And I wanted to make sure that this bundle of joy I was holding in my arms would always be taken care of.
Additionally, my wife wanted to stay home with our son for his first few years of life, so I knew that my job would be our only household income for the foreseeable future. This made the need to take out a life insurance policy even more urgent in case anything happened to me.
My life insurance policy went into effect in July of 2015. That meant my wife and son were unprotected for three months after he was born, and my stress level was pretty intense during that period. Looking back, I wish I would have taken care of my life insurance before my son's birth.
2. My wife and I had recently bought a home.
In May of 2014, my wife and I bought our first home.
Up until that point, we hadn't taken on any debt in our marriage. Both of our cars were paid for and neither of us had student loans. But now that we had a joint debt, I began thinking a lot more about the need for life insurance.
If I die before my wife, I don't want her to struggle to make our mortgage payment. She'll have enough stress without having to worry about losing our home.
Having life insurance gives me peace of mind that housing won't be a concern for my wife and two boys. And that helps me sleep better at night.
3. I wanted to lock in a low rate.
Once I knew that I needed to buy life insurance, my mentality was, "Why wait?"
I knew that term life insurance can be incredibly cheap when you're in your early twenties. And I also knew that procrastinating would only cause my monthly premiums to rise.
So I chose to bite the bullet and try to get coverage as soon as possible. I wanted to lock in that 25-year-old rate while I still could.
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How I chose my life insurance policy
My first step in picking out my life insurance policy was deciding how much I needed.
A good rule of thumb is to take out a policy that's 10-12 times your annual income. Based on my income at that time, a $500,000 policy was the right fit.
Using a comparison shopping site
To shop for my life insurance policy, I used a comparison site called Quotacy. Like Policygenius, Quotacy is a comparison site that will show you quotes from multiple insurance companies at once.
Once I filled out my personal information, Quotacy connected me with my own personal agent named Jason. Every step of the way, from my initial quote, to my health exam, to the signing of the policy, Jason was available and helpful.
With Jason's help, I was able to lock in a $500,000 policy with American General Life Insurance for a monthly premium of $20.91. Yes, that's a killer rate. And it shows how much you could potentially save by buying life insurance when you're young.
Making adjustments
Life insurance needs can change over time. For instance, while $500,000 was the right size policy for me at age 25, it looks a little lean now.
So this year, I plan to either increase the benefit on my current policy or shop for a new policy altogether.
My situation isn't all that unusual. For most of us, our lives are changing on a constant basis. After a few years, your life insurance may no longer fit your current financial situation. That's why it's a good idea to reevaluate your life insurance policy every few years to make sure that you're still adequately covered.
The bottom line
Not everyone needs life insurance. You could be well into your 30s or 40s and have no need for life insurance if you're single and have no debt.
But if you have joint debts with your spouse or you have a child who depends on your income, you probably need life insurance … no matter how young or old you may be.