There was a time, perhaps a generation or two ago, when turning 40 meant you were “long in the tooth,” “no longer a spring chicken,” or “over-the-hill.” In other words, you were old.
But in the last 30 years or so, a dramatic change has taken place. With all we’ve learned about the benefits of proper diet and exercise, it’s no surprise that people are taking better care of themselves. The amount of adults who smoke has declined from 21% to just 15
% and that number is still dropping. Millions have instead taken up running, biking, meditating, and other healthy activities. As a result, people are living longer and looking far younger than their birthday might indicate. And 40? It’s taken on a whole new meaning. After all, these days “60 is the new 40.”
Is 40 too late to get life insurance?
There’s another aspect to people taking better care of themselves, and living longer. Many are also postponing marriage, children and home buying well into their 30s and beyond. So rather than the usual financial obligations ending for most by their mid-50s as they once did, today those obligations can stretch well into their 60s.
That means many 40-somethings are in the peak years of their heaviest financial obligations – paying the mortgage while saving for college and retirement. Life insurance over the age of 40 for most people isn’t just a consideration, it’s a necessity. In fact, it may be exactly the right time to increase your existing coverage, or to get coverage for the first time.
And while life insurance might have been less expensive to buy in your 20s, the longer you wait to protect your family, the more expensive that coverage will continue to become.
Financial needs are easier to assess in your 40s
Yes, life insurance does cost more the older you get, but here’s some good news. By the time you reach your 40s, it’s far easier to precisely determine your financial needs. When you were in your 30s, and especially your 20s, $200,000 probably sounded like a fortune. It was easy to imagine living on that money for the rest of your life. But as the years have passed, your salary has increased along with the costs of maintaining your home, car, a 529 plan, and the day-to-day expenses of life.
Buying life insurance when you were younger meant guessing where you’d be in your life. It would have been easy to buy too little or maybe even too much coverage. So if you did purchase life insurance at a younger age, it's a good idea to review your coverage annually, in case your needs have increased.
Think about what you need to protect now
Whether you’re getting life insurance for the first time, or increasing existing coverage to protect your expanding assets, the first step is to assess your financial needs and obligations. Has your salary increased over the years? Is it likely to continue increasing? Do you have children? Are you paying for college? Or contributing to a 529 plan? Are you and your spouse prepared for retirement? How much is left on your mortgage? These are all enormous expenses that your spouse will have to take on alone should the unthinkable happen to you.
Then again, you may be farther along in your financial obligations. Your mortgage may be paid off, and your children may have already finished college. If so, good for you! In that case, your life insurance needs won’t be as critical but you might want to consider term life insurance for estate planning. Naming your spouse as beneficiary would provide for a more comfortable retirement, free of the tax implications that may come with inheriting retirement accounts like an IRA or 401(k). Of course, you could also name your children as beneficiaries, and help to transfer some of your assets to the next generation without worrying about taxes.
Getting the details right
While term life insurance is one of the most affordable types of coverage available, getting the details right can help make sure you get the right coverage at the right price. These details include:
Coverage amount. As we’ve shown, your finances will determine how much coverage you need. Experts recommend six to eight times your annual salary, but that’s just a start. To get a more accurate number, take a good look at where that money may need to go:
- Living expenses, including rent or mortgage
- Household debt
- Childcare while the surviving spouse is working
- Estate and other taxes
- College tuition
- Medical bills
- Funeral costs
The term. If you’re buying life insurance in your 40s, you might think a shorter duration would be a good way to save money. But think about a 10-year term. That only takes you into your 50s. You’re still young and may have some significant financial obligations still to come. Be sure to consider everything, and plan for it.
Beneficiaries. People usually choose their spouse as sole beneficiary. But, you may need to think about naming what’s known as a contingent beneficiary. This is often a family member who would care for your children if both you and your spouse were to die.
Stay-at-home parents. Do stay-at-home parents need life insurance? It’s impossible to overstate how much a stay-at-home mom or dad contributes to the family finances. No, he or she doesn’t earn a salary, but they do provide non-stop benefits that would have to be paid for if he or she were no longer there – daycare, carpools, household chores, preparing meals…you get the idea.
The best age to buy life insurance? Right now.
We all know what life insurance is designed to do. And many of us wait years, or decades to start a family. So, we never even asked ourselves, “When should I get life insurance?” because we never thought we needed it. But for those of us who woke up one day with house and car payments and little ones filling the house with love and laughter, there’s no going back. Now is the time to think about how much they mean to you, and how much you mean to them.
By purchasing term life insurance now, in your 40s, you can help protect all the joyful days they have ahead, your spouse’s ability to pay the bills, and let them stay in the home they know and love. Because what we do now matters in the years ahead of us, not the years behind us.