Is there any reason for me to have life insurance? I'm 29, earning $100K a year, but I have no dependents and only $30K in student loan debt. It seems like a waste since nobody relies on my income for financial support. So, I thought this was an interesting question: when should you need life insurance?
First, let me give you the really good financial advisor disclaimer. We don't know your unique circumstances, we don't know you as a unique person, so we cannot give you specific advice as to whether you should or should not do something. Please do not misconstrue what we're about to say as specific advice for your situation.
What we will say is, okay, when does it make sense to have life insurance? When is the point where you normally do that? And you already hit on it. The purpose for life insurance is if someone else is depending on your ability to generate wealth and create income, then you have an insurable need on your life.
Now, what's interesting is those people are not always just a spouse or children. Maybe you have a business partner, and if something were to happen to you, there needs to be life insurance so that the business has continuity. Or maybe you're a key employee for your company, and life insurance is needed to provide capital resources if you're not there.
The first thing you have to assess is whether there is an insurable need on your life. And once you determine if it's there, you need to decide if you need to act on it now. Let me tell you what the insurance salesman will tell someone like Christie, who is 29 with a great income. They'll say, "Hey, life insurance right now is going to be as cheap as it's ever going to be. You're healthy, so go buy your life insurance. You'll get the absolute best health rating because you're super healthy at 29, and it'll be really, really inexpensive. Lock in that low premium with a 30-year policy, and it'll be there when you need it."
Maybe that's the right answer for you, or maybe it's not. I do know from living around the life insurance world that the premium change between ages 20 and 40 isn't really all that significant based on mortality tables. So, I don't know if there's a ton of merit in the argument of getting forced into life insurance prematurely because it's as cheap as it'll ever be and you're as healthy as you'll ever be.
The healthier way to look at it is to prioritize where every dollar goes. You don't want to focus on something that may or may not be needed while neglecting building assets that create wealth. You're in a phase where you don't have a lot of people depending on you, and there are other financial priorities to consider, such as reaching 25 investments and dealing with taxes on your $100K income.
Maybe over the next decade, things will change, and there will be insurable needs arising. But for now, it might be more prudent to focus on building wealth and assets rather than purchasing life insurance prematurely. Assess whether you have a term need or a permanent need, and consider term insurance for specific needs with a level premium, or permanent insurance if the need is expected to be permanent and you're worried about future insurability.
Unfortunately, I see many people being sold permanent insurance for term needs, which could have been used to build wealth or cover other financial obligations. Be cautious of salespeople who try to push one product without considering your specific circumstances. Self-regulation and cleaning up the industry can help improve the reputation of life insurance professionals. For more information, check out our free resources here.