There’s a reason consumers are often told to purchase life insurance at a relatively young age. The younger you are when you apply for coverage, the lower your premium costs are likely to be.
Forbes Advisor reports that the average cost of a 30-year, $250,000 term life insurance policy for a 30-year-old male is $276 a year. For a 40-year-old male, the cost of the same length and amount of coverage rises to $372 a year.
But while applying for a life insurance policy at a young age might help you save some money, it might also backfire on you. Here are a few mistakes you risk making when you apply for a life insurance policy when you’re very young.
1. Failing to account for having kids
Let’s say you buy life insurance at age 25 when it’s just you and a spouse. Maybe your life plan is to not have kids because you’re put off by the cost of raising them and can’t imagine being in a secure enough spot financially to comfortably afford them.
But what if, during your 30s, your financial situation changes — your income rises, you’re able to boost your savings account balance, and you feel far more secure? At that point, you may decide to bring children into the world after all. But at that point, you may not have enough life insurance coverage given your new family dynamic.
2. Failing to account for future wages
It’s common to calculate your life insurance payout as a multiple of your salary. So if you earn $50,000 a year now, you may decide you want to replace your annual income 10 times over, leaving you with a life insurance benefit of $500,000.
