Choosing a life insurance policy at any age

Life insurance is an important part of your overall financial planning at any age. Buying a policy helps to provide financial stability for your loved ones when you’re gone. Here are some things to consider when looking to purchase life insurance in your 20s, 30s, 40s, 50s, 60s, and beyond.

What types of life insurance policies are available to me?

There are generally two basic types of life insurance to consider – term and permanent policies.

Term life insurance

Term life insurance is a policy that lasts for a set number of years (the term) as long as the premium is paid. Once the term expires you are no longer covered under the policy. To continue the coverage you generally have two options: to shop for a new policy or convert your policy into permanent life insurance. Term life insurance includes a death benefit in the form of a lump sum of cash that's paid out to a beneficiary by the life insurance company when you die. This lump sum can be used for a variety of things, from burial expenses to mortgage and debt payments, to living expenses for your family, or whatever your beneficiary chooses. The death benefit is typically tax-free. Term life insurance generally offers you:

• Affordability

• A tax-free death benefit for your beneficiary

Permanent life insurance

Permanent life insurance is the general term for life insurance policies that do not expire. Unlike term life insurance, which provides death benefit protection for a specific period of years, permanent life insurance can last the lifetime of whoever is insured, as long as premiums are paid subject to the terms of the policy. These policies may also offer the potential to build cash value. The cash value for permanent life insurance policies grows generally tax-deferred which means you don’t pay taxes on any earnings as long as the policy remains active.¹ Policyholders can access cash value for a variety of reasons.² It can help:

• Supplement their retirement income, generally tax free
• Potentially reduce income taxes in retirement
• Pay medical bills during an illness
• Pay off debts like credit cards and student loans
• Pay down – or pay off – a mortgage
• Pay college tuition

Compared to term life insurance, permanent life insurance usually costs more in premiums but it offers you:

• No expiration date. You can keep it as long as you pay the premiums.
• Potential Cash value growth.
• Premiums that are usually more expensive than term policy premiums.

How much life insurance do I need?

The amount of life insurance you buy generally depends on the amount of money needed to pay off your debts and to help support your dependents in your absence. An insurance agent can calculate your life insurance needs, and it’s a good idea to ask questions such as how he or she arrives at the figure, what the number is based upon, and what specific assets and obligations were used to make the calculation. It is important that you look at your overall financial status and future needs for your family before you consider buying insurance.

Life insurance in your 20’s

In your 20s you are usually healthier with fewer health concerns, so the risk for insurance companies to cover you is minimal. Generally, this means life insurance costs will be at often their lowest. It can be a smart idea to buy life insurance early on, even if it’s a small policy.

Life insurance benefits in your 20's can:

• Offer cheaper rates.
• Provide funds for your funeral expenses.
• Help your beneficiary pay your debt, whether a mortgage, credit card debt, or a student loan.
• Help pay co-signed debts, such as student loans that you don't want your co-signer stuck with if you pass away.
• Provide your beneficiary financial protection if something happens to you.

Term life insurance can be a great choice for most life insurance shoppers in their 20s because it's simple and affordable. If you may be on a tight budget, term life insurance may be a good match for you.

Life insurance in your 30’s

If you purchased a policy in your 20's, now may be a good time for a policy review. When you enter your 30's you may have more financial responsibilities. Many people are married at this age, have a child, and perhaps own a house, so life insurance can become an important part of protecting your family and assets. Figuring out how much insurance you need is generally based on what your family requires. If you have children, it’s important to consider their future should something happen to you. When determining how much life insurance is needed, consider such factors as the cost of caring for your child, as well as the cost of living for your family after you’re gone. What are your monthly bills and fixed expenses? What do you provide for your family such as necessities like food and medical costs, but also discretionary funding and other quality of life needs.

Once you know your expenses, there are online life insurance calculators to help determine how much coverage you might need and what your rate might be.

Life insurance benefits in your 30's

• Provide money for funeral expenses, which can add up to thousands of dollars pretty quickly.
• Offer a way to help ensure your beneficiary isn’t saddled with your debt. This could be a mortgage, credit card debt, or a student loan.
• Offer protection for a spouse or partner who relies on your income.
• Assist with childcare expenses.

Life insurance in your 40’s and 50’s

If you already have a policy through your work, now can be a good time to review and make any adjustments and consider adding additional insurance. Is your workplace life insurance enough? As you get older, life insurance coverage will generally cost more, but it can still be very affordable even if you don’t have a policy at all. You should consider the need to do some research to determine what insurers offer and options that best fit your family’s needs.

During these years, you may want to consider permanent life insurance, which offers potential cash value growth opportunities. This benefit can offer you greater flexibility when it comes to saving for retirement and estate planning.

You may find a term life insurance policy might not be as cost-effective for you if you don’t have financial dependents or you’ve built enough savings to cover debts or final expenses. However, if you have people who do rely on your income, then buying more life insurance coverage might be the right move.

Life insurance benefits in your 40's and 50's can:

• Provide money for your spouse or partner who relies on your income.
• Provide education funds for your children.
• Provide money for final expenses.
• Help prevent financial hardship for beneficiaries who have to pay your debt on a mortgage, credit card, etc.
• Provide an inheritance for your loved ones.
• Offer a way to pay for estate taxes.

Life insurance in your 60’s and beyond

It’s not too late to buy life insurance when you reach your 60s, and this may be a good time to reevaluate your financial situation before you purchase a policy. A term life insurance policy could be a good, inexpensive option. If you’re in good health in your 60s and even 70s you may be able to get a 10 or 20-year term life policy. Once you get closer to 80, it can be harder to get term life coverage.

Buying life insurance coverage with your future retirement in mind can make it easier for your family to handle finances when you die. It can also help protect your money, manage your taxes and offer you the opportunity to grow cash value which you can use for a variety of needs and activities.^1,2

Life insurance benefits in your 60's and beyond can:

• Provide a legacy or inheritance for your beneficiaries.
• Provide money for debts or bills your loved ones must pay.
• Pay for medical bills or other final expenses.
• Provide a way to pay for estate taxes.

Meet with a financial professional

Deciding to buy life insurance at any age can be challenging. If you want to know more about how various life insurance options can best fit your needs, consider making an appointment to discuss the pros, cons, and possibilities with a financial professional. To help you find a financial professional near you, submit your information on our find an agent page.

1. Neither North American Company for Life and Health Insurance nor its agents give legal or tax advice. Please consult with and rely on a qualified legal or tax advisor before entering into or paying additional premiums with respect to such arrangements.

2. Policy loans from life insurance policies generally are not subject to income tax, provided the contract is not a Modified Endowment Contract (MEC), as defined by Section 7702A of the Internal Revenue Code. A policy loan or withdrawal from a life insurance policy that is a MEC is taxable upon receipt to the extent cash value of the contract exceeds premium paid. Distributions from MECs are subject to federal income tax to the extent of the gain in the policy and taxable distributions are subject to a 10% additional tax prior to age 59½, with certain exceptions. Policy loans and withdrawals will reduce cash value and death benefit. Policy loans are subject to interest charges. Consult with and rely on your tax advisor or attorney on your specific situation.

Life insurance policies have terms under which the policy may be continued in effect or discontinued. Permanent life insurance requires monthly deductions to pay the policy’s charges and expenses, some of which will increase as the insured gets older. These deductions may reduce the cash value of the policy. Current cost of insurance rates and current interest rates are not guaranteed. Therefore, the planned periodic premium may not be sufficient to carry the contract to maturity. For costs and complete details, refer to the policy or call or write North American Company for Life and Health Insurance at One Sammons Plaza, Sioux Falls, SD 57193. Telephone 877-872-0757.

The term financial professional is not intended to imply engagement in an advisory business in which compensation is not related to sales. Financial professionals that are insurance licensed will be paid a commission on the sale of an insurance product.

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