20 September, 2019

Quora Answer: At What Age Should I Buy Life Insurance?

The following is my answer to a Quora question: “At what age should I buy life insurance?

You should get it as early as possible.  There are two primary reasons.

The first is that you want to lock in your coverage when you are healthy, before the documented development of any medical condition.  Once a condition is medically documented, it becomes a pre-existing condition, meaning that any condition related to that part of the body, that system, or organ, is not likely to be covered; and there will most certainly be loading, meaning that you will pay more premium.  In the case of certain conditions, once you have it, even if you are willing to pay the substantial premiums, you will not get coverage.

The second is because level premiums are calculated based on your life expectancy.  There is a specific number that is divided by the number of years since your policy inception.  That means the earlier you get coverage, the more years your policy may be amortised, and the lower the regular premium.  As such, assuming a life expectancy of 84 years for men, as in Singapore, a policy incepted when the life insured is 24 years old  means the overall premium and distribution cost is amortised over 60 years.  In the case of a policy incepted when the life insured was 44 years old, the amortisation takes place over 40 years, which increases the cost of the regular premium.

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