Why it's a good idea to consider life insurance in your 30s.
In your thirties, you’re probably learning that it's a good idea to start doing less of what you want to do and more of what you need to do to set yourself up for the future. You're likely sorting out your career, starting to build up your assets and thinking about your relationships. While it's less fun to think about, this is when you should start look into life insurance to protect the people and things you love.
30s? Isn't that too young to be thinking about life insurance?
While you might think that you don't need to worry about life insurance while you're still pretty young, it's actually a great time to set yourself up for the future. Here are some things that often change in your 30s:
- You have people who depend on you financially. By the time you turn 30, it's likely that you will have a partner or a family. If you were unexpectedly die or too ill to work, how would they manage?
- You earn more. In your 30s, you're starting to earn more money and are the cusp of a burgeoning career. Your increased salary, corresponding lifestyle and assets (e.g. a mortgage) need to be protected.
- It covers you for more than just death. You can customise cover to protect yourself from major injuries, illnesses and disabilities. Think about how long you'd be able to maintain your life if you weren't able to work - for a few months, or ever again.
How much does life insurance cost for a 30-year-old?
We reviewed quotes for a policy with a $500,000 lump sum and found some interesting differences between 30-year-old men and women.
|AIA Priority Protection||$30.13||$24.21|
|Asteron Life Complete||$30.18||$24.37|
|TAL Accelerated Protection||$30.48||$24.12|
|Zurich Wealth Protection||$30.91||$25.57|
|BT Protection Plans||$33.37||$25.43|
|AMP Flexible Lifetime Protection||$33.71||$28.15|
Quotes are taken from our quote engine and based on a 35 year old office worker who is a non-smoker. Data last checked as accurate February 2017.
What's the advantage of getting life insurance in my 30s?
The benefits of life insurance, whatever your age, depend on the type of insurance you have. Most policies include financial compensation for your beneficiaries if you die unexpectedly and for yourself and your dependants if you are unable to work.
The key advantage of taking out life insurance in your 30s is the cost. The fact is that your premiums will be based on your young, healthy status and will be cheaper than when you apply later as an older or less healthy person.
The cost of life insurance only goes up from here
What should I consider before getting a policy at this age?
There is a variety of different factors that need to be considered when deciding whether to take out life insurance, what types of cover to get and how much cover you’ll actually need. These can include:
- Your family situation. If you have a partner and children you need cover to provide for them in your absence.
- Your assets. If you have a house, car(s) or investment portfolio, you’ll need to cover their cost if you die or are unable to work.
- Your debts. If you have loans, a mortgage or credit card debts, you’ll need cover to pay them off so your family aren’t left with them.
- Other insurances. If you have other forms of cover such as home and contents, car and business insurance, you’ll need cover to maintain them in your absence.
- Your career. If you are in a high paying job or run your own business, you’ll need income protection in the event that you are ever unable to work.
What types of life insurance do I need to consider?
There are several types of life insurance policies providing cover for different eventualities. A normal life insurance policy should include cover for the following:
- Life cover. A lump sum payout if you die or are diagnosed with a terminal illness (less than 12 months to live).
- Trauma insurance. A lump sum payout if you are diagnosed with one of a specific list of illnesses such as heart attack, cancer or stroke.
- Income protection insurance. A replacement income of up to 75% of your normal income if you can’t work due to illness or injury.
- Total and permanent disability (TPD) insurance. A lump sum payout if you become disabled and are unable to work again.
As anyone can die at any age or become injured or ill without warning, these types of cover are as important for a 30 year old as they are for any other age group. The only question is the amount of cover you need in each category and as discussed previously, this will come down to your particular personal situation.
Options to consider in your 40s
Stepped vs level premiums
Once you’ve decided you need life insurance in your 30s, the next decision is whether to choose level or stepped premiums. Level premiums are considered best in the long term, as the premium you pay now will be similar to what you will be paying 10 or 20 years down the track. Level premiums are initially more expensive than stepped premiums, but they don’t become more expensive every year, apart from basic indexation rises to keep pace with inflation.
Short term vs long term benefits
On the other hand, stepped premiums start cheaper and increase every year in line with your age. This means that while you make a short-term gain now, you will be paying much more in 10 or 20 years for the same cover. One of the main reasons you might opt for stepped premiums as a 30 year old would be if you can’t afford to pay level premiums now or if you anticipate earning a much larger salary in your later years, which would take the sting out of the higher premiums.
Another option, which is becoming popular, is hybrid premiums. These are a cross between stepped and level premiums, with stepped premiums for the first few years to accommodate your tight budget and level premiums after that once you have found your financial feet and can afford the additional cost.