At what age should you purchase your first insurance plan? When you start working? When you get married?
There is no one-size-fits-all answer to this question but, there are generally two categories that people fall into when it comes to the right time to buy insurance
- Age-based approach – buying insurance only when you reach a certain age
- Event-based approach – buying insurance only when you hit certain milestones in life, such as marriage or when you have you first kid
However, many people are still confused by which is a better approach when it comes to buying life insurance. It is understandable since life insurance is bespoke to individual needs and circumstances. Therefore, to help you make the best choice, we are going to examine the pros and cons of each approach in this article.
The age-based approach
People who follow the age-based approach would normally tend to get their insurance at the age of 25-30, which is when insurance premiums are generally still low and the time people start thinking about getting life insurance after working for a number of years.
The main benefit of the age-based approach is that once you reach your desired age to get yourself insured, you will make commitments to start buying necessary insurance policies. This prevents you getting yourself insured too late – i.e. the onset of bad health may drive your premiums up, or worse, make you uninsurable. In other words, it is important to get yourself insured while you are still young and healthy in order to purchase your insurance protection at a low price.
Nevertheless, the age-based approach does not allow you to plan for future events. For instance, if you buy insurance for yourself before you get married, your insurance does not cover your spouse and you would need to get a new plan to top-up the difference.
As policies are executed individually, you would need to pay for additional services and, that money could be used for higher coverage instead. In addition to that, more medical check-ups may be required to qualify for the additional coverage.
The event-based approach
Those who prefer the event-based approach buy insurance only upon hitting certain life milestones, such as marriage or the birth of a child. The benefit is such that this approach allows you to plan for the exact insurance coverage you require, including the coverage of your spouse and/or child.
The risk is that if you contract a disease such as high blood pressure or diabetes by the time you reach your milestone, your health condition may drive up your premiums or make you uninsurable.
People who follow this approach also tend to delay the purchase of necessary insurance coverage and, during this period, they are not insured against a tragedy or accident.
4 reasons people why people don’t purchase life insurance
Although we have mentioned that people generally follow either the age-based approach or the event-based approach to buy life insurance, there are some people who follow neither approach. Some people feel that life insurance is not necessary as they are not the beneficiary that is entitled to the proceeds of the policy. Or they think that they do not need life insurance because they are healthy and young and, having hospitalization insurance is adequate. We are going to point out some common misconceptions about life insurance.
1. The cost
A lot of people do not buy life insurance as they find it costly. Although some life insurance policies come with high premiums, there are also affordable options in the market that can adequately insure you. If you choose to pay your premiums monthly, it doesn’t feel as painful.
2. The returns are not as good as those of other investments
Some people prefer to invest in other financial plans such as stocks and bonds that have high returns. However, the purpose of life insurance is not to grow your money and, it is to give a protection for your life. It is also important to note that life insurance has a surrender value in case you want to cancel your plan in the future.
The main purpose of life insurance is that it will lessen the financial burden on your family and/or dependants when you are no longer around. This is the form of return you would want to leave behind if you truly care about your family and dependants.
3. The returns are not immediately visible
If you do investments such as stocks, you can quickly view the performance of your investments.
Not many people are aware that they can always check the accumulated benefits on their life insurance plan by logging in to the insurance company’s website. It is also important to ensure that the insurance company declares the benefits in a transparent manner before you buy a policy from them.
4. Life insurance is confusing
Many people find life insurance confusing. They may not understand how it works or what the terms and conditions are.
It is true that trying to understand about life insurance can be overwhelming at first. However, there are a lot of online articles explaining about life insurance and you can also ask your financial consultant to explain about life insurance. The consultant can also recommend a life insurance plan tailored to your needs.
The best time to buy insurance – As soon as possible
It may be logical to follow either of the 2 above-mentioned approaches but those 2 approaches are still debatable.
It is best to have the right insurance when needed and therefore it makes sense to get yourself well-protected as soon as possible and doing so provides several advantages.
Firstly, life insurance with a rider on critical illness covers critical illnesses that may strike you any time in your life. If you experience the onset of serious diseases such as cancer, the cost for your treatment will be covered by the life insurance. This will help lessen the financial burden on you and your family members, who may already be emotionally affected by the health condition.
Secondly, if you get yourself insured while you are young, your premiums will be lower as your health risks are lower. Buying life insurance early not only makes it more affordable but also lets you enjoy full benefits at lower prices and hence, you are getting more bang for your buck.
Don’t wait for the right age or your desired milestones to be hit to buy your life insurance. The sooner you do it, the better it is for you and your family.