Some people use life insurance as an investment vehicle, putting in more cash than is needed to actually provide the death benefit. This "extra" cash grows on a tax-deferred basis and can either be borrowed out, withdrawn or used to pay premiums in later years, depending on how the policy is structured.
But for most younger people, simple term insurance is the least expensive. It can be purchased on a "level" basis -- meaning the premiums are guaranteed not to rise for a period of 10, 20 or even 30 years. I used AccuQuote.com to get the following prices for a half-million-dollar policy of 20-year-level term:
At age 40, a man in the top preferred (non-smoker) category could buy this half-million-dollar, level-term policy for $360 a year. A woman would pay less -- only $310 a year.
Waiting can cost you money. At age 55, the 20-year level premium would be $1,495 a year for a man and $1,125 for a woman.
And you can still buy this insurance at age 65, though it is more expensive -- $5,015 a year for a man, $3,185 for a woman.
Depending on your need for money -- either to provide for a survivor or to pay for estate taxes, life insurance could either be an expensive burden -- or a bargain.
Says Byron Udell, founder and CEO of AccuQuote.com:
"Life insurance plays an even more important role in a family's financial plan today than it did just one year ago. Why? Because if these people were to die today, their families would be a lot worse off than if these declines in net worth had not occurred. Life insurance continues to be the easiest and least-expensive way to replace these lost assets in the event of a premature death of the breadwinner."
Two things remain sure in life -- death and taxes. Will your family have the appropriate coverage for those two certainties? Not unless you're willing to make a plan in advance.
That's the Savage Truth.