I won’t be wrong if I say that people entering their 40s often scoff at the idea of life insurance.
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It might seem “unnecessary” in their eyes, however, that’s the wrong mindset to have. Life insurance remains an important investment for a number of reasons as this is a critical point in one’s life.
Imagine a 40-year old professional with a mortgage, young children, and a mostly dependent family. This professional will require some type of safety net in case they face an untimely death. In fact, life insurance becomes one of the biggest protectors a person can have in such situations.
Here’s more on why life insurance in your 40s is a good idea.
Table of Content
Ideal Policy In Your Forties
Life insurance is an umbrella term for a variety of options. Most people have a distorted view of what life insurance offers, how it works, and the value in signing up.
Many people ask, what is the best life insurance for people over 40?
I will say that during your forties, it’s best to look at term insurance.
Term insurance refers to coverage that comes with a pre-determined expiration date. This can be at a specific age (i.e. 70) or a particular year as deemed appropriate by both parties. The premiums are going to be set in stone for that specific period, which can range from 10-30 years.
Once the period has been completed, a person can move forward with a new plan at a higher premium or have it terminated.
The reason this is such an attractive option has to do with its pre-determined protection. A lot of people worry about those “in-between” years from 40-70 as there’s a good amount of time left before retirement. To get to the other side and retire peacefully, term insurance can act as a safety net.
Once you make it, you can retire and take advantage of the savings that have accumulated.
On the other hand, whole life insurance is a bit complex in nature and ultimately you might end up paying more than the benefits and thus not worth it at the forties.
Tips To Select Coverage Amount and Terms
A study completed on Americans, aging and public health stated the numbers are rising with more than 12.1% entering their 60s by 2030. This demonstrates a larger segment of the American population, which is in its mid to late 40s and may not have appropriate life insurance in place.
To get started, it’s best to understand how to go about finding the right plan.
1) Find the Right Term
It’s important to find the right term because each situation is different.
In some cases, you will need a larger safety net of 30 years depending on how young your children are. While others are going to be more than happy with a smaller term set at 10-20 years. In general, it is often going to depend on your risk tolerance and how much money is in your bank account.
Those with larger savings might feel safer with a reduced term, while those with close to nothing are going to push for a larger term.
It’s important to take this into account while setting up a new life insurance policy.
1. Determining Income Needs of Your Family
2. Assume a 3% Return On Your Investment
3. Divide Income By 3% To Figure Out Your Family’s “After Death” Needs
4. Subtract Total Investment Needed With Your Current Balance
5. This Figure Is How Much Life Insurance Is Needed
For example, let’s say you earn $100,000 annually. You would take $100,000 and divide by 3%, which equals $3,333,333. You need this amount to satisfy your family’s long-term needs in case of an early death. Of course, you can lower this amount based on how much is already in your savings account as that will vary from person to person.
- Protects Family
According to a recent study by Psychology Today, a middle-aged person will often exhibit signs of “nighttime worrying,” because of the stresses in their life. These stresses are going to include a mix of work, bills, and health. However, one of the biggest worries would be one’s family and how protected they are.
Many individuals in their 40s are going to have young children that need to be taken care of. This can happen as long as they are alive and have a job that’s paying enough money. However, the same cannot be said for what happens if they were to face an untimely death.
This is where term insurance can be incredibly useful as it helps protect the family in case something were to happen.
- Peace of Mind
A study completed on the perception of aging illustrated how the human mind changes over time. A person in their 40s is going to have a much higher perception of aging than someone in their 20s or 30s. This phenomenon also tends to impact a person’s peace of mind and general quality of life.
With a high-quality life insurance policy, it’s possible to reduce some of these stresses.
A lot of people in their 40s want to live for a long time and it’s important to stay safe. However, this perception of aging can start to creep in and that’s when the human mind requires something to calm it down. As a result, there’s nothing better than a good life insurance policy that’s set up for a specific period of time (10-30 years).
- Helps Plan for the Future
The future is unpredictable and that’s not good for those who like to plan.
Being able to rely on the life insurance for at least 20-30 years is a good way to stay safe. It will make sure the future doesn’t fall apart for your family because of a death.
Instead, the term insurance is going to bridge that gap between 40-70 before a person retires.
- Short-term Cost
Yes, there are disadvantages to worry about and a person has to be educated on these details. One of the biggest concerns would be the short-term cost of paying for your policy.
For example, the average life insurance policy is going to be somewhere between $800-$1,200 a year. This has to be kept in mind as a person continues to make payments.
In most cases, this cost is well worth the investment as it provides peace of mind.
- Unnecessary Features
Another cost is dependent on the person and their policy. This is why it’s important to stay patient, focus on the features, and find a policy that is well worth your time. Choosing the wrong policy is going to lead to unnecessary features, which start to raise the premium without reason.
Learn about all of the features and then make a decision.
Please note, all quotes are going to incorporate a specific set of variables. These variables help determine which policy is appropriate for both parties.
Variables can include:
- Smoking Habits
- Medical History
- Types of Policy
- Coverage Amount
It’s important to remain honest during this process as it can help expedite the process. A specialized insurance agent will help analyze these variables and come up with an immediate assessment. Clients should remain patient and take the time to learn about these details before making a decision.
How much is life insurance for a 40-year-old?
The average life insurance plan ($500,000 for 30 years) is going to be $1,000 (annually). This number can increase and/or decrease based on a person’s history and all of the variables listed above. It can also increase if the policy is larger (i.e. $1,000,000).
For more information on the ideal policy, features, and more, please click here ask for a quick quote. This team provides an assortment of options and will make sure to find the best fit.