Insurance strategies

Smart Life Insurance Strategies for Young Buyers

The decisions you make when buying life insurance in your 20s or 30s can help you avoid scrambling to find coverage before your term policy expires.

You could buy a permanent life insurance policy and never worry about the coverage expiring. But the premiums are much higher than premiums for term insurance, and young families starting out with permanent insurance often buy too little coverage because it’s all they can afford.

“What we really need to focus on with young families is the amount of the death benefit,” says Tim Maurer, director of advisor development for the BAM Alliance, a network of independent financial advisors. A 30-year term insurance policy is also an option, but those premiums can also be expensive.

A more cost-effective way to extend coverage is to layer policies, says Maurer. Purchase a 20-year term insurance policy for the bulk of your coverage. This allows you to get a death benefit large enough to protect your family while your kids are home and you’re making mortgage payments. “You want to have all those years covered, but you might not need as much coverage for all that time,” Mauer says. If you want coverage that lasts longer, you can also get a 30-year term with a lower death benefit.

For example, a 35-year-old man could buy a $500,000 20-year term insurance policy for $250 per year and $250,000 30-year coverage for an additional $260 per year, which would cover him up to age 65, Udell says. If you also want permanent coverage, you can add $100,000 Guaranteed Universal Life (GUL), which you can keep for your lifetime, for about $620 per year (whole life would cost about double that). A 35-year-old woman would pay about $215 per year for a $500,000 20-year term policy and could get a $250,000 30-year term policy for an additional $226 per year. She could add a $100,000 GUL policy for about $515 a year.