Life Insurance for 30 to 40 Year Old Adults

The Value of Life Insurance for 30 to 40 Year Old Adults

When to buy life insurance

Benefit of life insurance in your 30s and 40s

• Financial security for dependents. If you have a family, life insurance can replace lost income, cover daily expenses, pay for childcare, and fund educational goals if something should happen to you.
• Debt management. Life insurance benefits can be used to pay off debts like mortgages, student loans, or credit card debt, easing the financial burden on your family.
• Covering final expenses. It can help cover funeral costs and other end-of-life expenses.
• Supporting aging parents. Life insurance can provide financial support if you are helping care for aging parents.
• Lower premiums. Buying younger generally means lower premiums.

How much coverage does a 30 or 40 year old need?

Many factors influence the size of the policy you might need at age 30 or 40. Not all 30 or 40-year-olds are in the same financial situation or have the same insurance needs. What to consider includes:

• Income Replacement. The death benefits from a life insurance policy typically serve as a replacement for the income your family will lose after your death. If you earn $50,000 per year and want to follow the general life insurance rule, your insurance policy should provide a benefit of at least $500,000. Generally, this amount should be the bare minimum coverage you get. It accounts for 10 years worth of income, but it doesn’t consider your end-of-life expenses, debts, or other financial obligations.
• Debt Considerations. If you have debt, you might want to purchase a larger life insurance policy than someone who is debt-free. Ideally, your policy will pay off your remaining debts after your death and leave your beneficiaries with enough to live on. If you have $250,000 in debt from a mortgage, a credit card, and a private student loan your parent co-signed for you, you’ll want to add at least $250,000 to your death benefit.
• Family Size and Needs. The number of people you support and their unique needs also influence the amount of life insurance coverage you’ll need to buy. If it’s just you and a partner and you both work outside the home for money, you can buy a smaller policy than someone who has a stay-at-home partner and three kids.

You can use the USDA’s estimated annual cost of raising a child to figure out how much coverage you need.² Multiply the annual cost, $12,980, by the number of years your kids have until they are 18. For example, if you have a 5-year-old and a 10-year-old, multiply $12,980 by 12 for the 5-year-old and by 7 for the 10-year-old to figure out how much it will cost to raise them through age 17.

If you hope your kids will pursue post-secondary education, you might want to include the cost of schooling in your death benefit calculations.

• You have aging parents. Unless your parents have long term care insurance or substantial savings, it’s possible you might have to help out financially at some point. This can be stressful even in the best of times, but if only one spouse is left with the burden, the stress and guilt levels may go up.
• You don’t have a special savings account for funeral expenses. The National Funeral Directors Association pegs the median cost of a funeral at just over $7,848.³ But most experts advise budgeting more than that to cover other expenses such as travel and family gatherings. You could set aside a special savings account for this or simply include the expense in your life insurance benefit calculations.

Review Your Policy Regularly

Keep in mind that your life insurance policy isn’t a buy and then forget thing. It pays to review your insurance coverage annually to make sure it still meets your needs and offers adequate coverage. Try to review your policy at least once a year or when any of the following takes place:

• Changes in Your Employment Status. If you get a better-paying job, your household income is likely to increase, which can mean the death benefit’s size should also increase. Getting a promotion or changing jobs can also mean that you have life insurance from your employer, which might affect the amount of coverage you personally need to buy. Another employment status change that can warrant policy review is if you decide to start your own company or become self-employed. Self-employed people tend to have more financial obligations than people who work for a company.
• Changes to Your Family. You might add to the size of your family, get married, get divorced, or start taking care of your aging parents. As the number of dependents you have increases or decreases, the amount of insurance coverage you’ll need will shift, too. Depending on the situation, you might need to add people as beneficiaries or remove them from the policy. If you have more children, you may want to extend the term of your policy to provide coverage for them until they are financially independent. As your kids get older, they are likely to need insurance coverage from you less and less. Once your kids are financially independent, they don’t need to be beneficiaries of your policy. You might also be able to reduce the size of your policy as your kids get older.
• Changes to Your Financial Situation. Your financial situation can change from year to year, based on your debts. For example, if you buy a house, you should review your life insurance coverage to ensure the benefit is sufficient to cover the mortgage and other expenses associated with the home. If you buy a car and get a loan to pay for it, you might need to adjust your coverage and benefit to include the car loan’s principal amount. Increases or decreases in your net worth also affect your life insurance needs. If your net worth drops, meaning there would be less to support your family if you were to die, you might consider increasing the amount of your life insurance coverage.

Key Features of Sun Life’s Group Term Life Insurance

Footnotes, Additional Details & Disclaimers