When to buy life insurance

The short version

If somebody would be in financial trouble if you died this year, the right time was already. If nobody would, there is no urgency, and buying now is a bet on your future self rather than a response to a present need.

That bet is sometimes worth making, for reasons below. It is not automatically worth making, and anyone telling a healthy 23-year-old with no dependants that they urgently need coverage is selling rather than advising.

Two clocks are running

Price. Life insurance is priced on age, and the price you are given is fixed for the length of the term. Buy a 20-year term at 32 and you pay the 32-year-old price until you are 52. Buy the same policy at 38 and you pay a higher price for the whole two decades. Insurers also band their pricing, so crossing a birthday can step you up more than the single year suggests. Waiting has a permanent cost, not a temporary one.

Insurability. This is the clock that matters more, and the one people discount because it feels abstract.

Coverage is priced on health at the point of application. Once a policy is issued, a diagnosis afterwards does not change the premium and cannot cause the insurer to cancel the coverage, provided you were honest and keep paying. That protection is the actual product.

A diagnosis before you apply changes everything about the application. It might mean a higher price, an exclusion, a smaller amount, a postponement, or occasionally no offer at all. Nobody schedules that. Someone who intended to sort out life insurance next year, and had a routine blood test in the meantime, is in a different position from the person they were.

Events that should trigger a look

Not a calendar, a list of changes:

• Buying a home, especially with somebody else on the mortgage
• Having or adopting a child
• Marrying, or entering a relationship where finances become shared
• Separating or divorcing, particularly where a court order or agreement requires coverage
• Starting a business, or taking on a partner
• Co-signing anything
• A partner leaving work, or a significant change in either income
• A parent becoming financially dependent on you
• Existing term coverage approaching the end of its term

Each of these changes who would be affected if you died. That is the only input that matters, so each one deserves a fresh look at the number.

Buying ahead of the event

The pattern that works well is buying just before rather than just after.

A couple who apply while house-hunting, rather than in the week the offer is accepted, are not trying to compress underwriting into a closing timeline. Parents-to-be who apply during a pregnancy rather than after the birth are dealing with it while they still have the attention to spare. Coverage bought early also lets you set the term length against the obligation you are about to take on rather than the one you have.

There is a limit to this. Buying at 24 for a mortgage you expect at 34 means paying for a decade of coverage you did not need, and by 34 you may want a different amount anyway. Ahead means months, not a decade.

The argument for young and healthy

For a young person with no dependants, the case rests on two things.

The first is locking in insurability. A small policy taken at 26 in good health is coverage that exists regardless of what shows up at 40. Whether that is worth paying for depends on how you weigh it, and it is a legitimate choice either way.

The second is more specific: most term policies carry a conversion right that lets you move to permanent coverage later without new medical evidence. A modest convertible term policy bought young is a foothold that keeps the door open. Some people also buy a small amount of coverage on a child or grandchild for the same reason, which is covered in coverage for children.

Neither of these makes it urgent. They make it cheap to keep options open.

If you are older

Being in your sixties or seventies narrows what is available, and it does not close the subject. Term coverage is still issued at those ages, though the length of term on offer shortens. Where full underwriting is difficult, simplified issue and guaranteed issue products exist specifically for this situation, with smaller amounts and different terms. What is realistic at each stage is set out in coverage for seniors and over 70.

The mistake at this end is assuming the answer is no and never asking. Applying costs nothing and the answer is frequently better than expected.

The one deadline that is real

If you already hold a term policy, its conversion right expires, usually at a set age or a set number of years before the term ends, whichever comes first. That deadline is written into the contract, it does not move, and nothing will remind you.

Anyone holding term coverage should know their conversion deadline. It is the one date in life insurance where waiting genuinely removes an option.