Should I Buy Whole Life Insurance?

Should I buy whole life insurance if I'm young and have no dependents?  This is a question that we field more often than you might think, so today we want to address this question for those who might be thinking the same thing.

It'll come as little surprise that we are more open to answering this question with a yes than pretty much any other website that focuses on personal finance related information.  Our view on whole life insurance comes from experience as things actually happen in the real world, for real people.  Also, I'm going to use “whole life insurance” a lot throughout this blog post but the same theory applies to universal life insurance.

We simply find more people ask us this question framed through the lens of whole life insurance and I'm trying to keep things as simple as possible for this discussion.

Should I Eventually Buy Whole Life Insurance?

If your review of the many things whole life insurance has to offer leads you thinking that you'd buy it if only you had the dependents to necessitate needing the death benefit, I'd argue you could probably set the stage for a secure financial future by establishing a solid life insurance base before the absolute need arises.

Keep in mind that, within certain reason, there are a lot of ways to justify some level of death benefit on most young healthy individuals with a bright future.

If you plan to one day have dependents and you have the financial resources to put towards whole life insurance, buying it now means you'll have one less thing to do once the real obligations come along.  You'll likely find life hectic at that point and could seriously appreciate having one less thing on the to-do list because you took care of it years ago.

Life insurance isn't going to get cheaper as you age, so locking in a lower price now is more prudent than the foolishness some might suggest.

You'll Probably Never be Healthier

I can hear my former sales manager smiling (I typed that right) as I bring up this point.  Sure some might consider this a cheesy sales pitch, but I assure you this cheesy sales pitch came into existence from the vantage point of experience.

Sure there are those who will have some life-altering event that causes them to focus on health and become “healthier than they were in their 20's,” they'll likely end up on an infomercial for some miracle health plan/elixir.  But just as the tiny text at the bottom screen is quick to remind us, I'll point out that these circumstances are few and far between.

The majority of us will experience declining health as the years go by as health is traditionally negatively correlated with age.  But even for those of you who wake up at 40, 50, or even 60 feeling pretty good, there are several factors that impact your “health” as it relates to life insurance underwriting.

More Medical Records Aren't Helpful

More years on the clock mean more paper in the file that makes up your medical records.  This isn't helpful for your cause when applying for life insurance many times.  Each passing year is a new opportunity for you to face some new diagnosis or uncover some susceptibility that won't bode well for the best life insurance rates.

Neither your penchant for salads nor your daily exercise habits is going to stop the continuously growing collection of health information and experiences that, but the pure probability is likely to give an underwriter some reason to assess you less favorably than last year.

Sometimes It's Not Your Health Problems

Speaking of things that your healthy lifestyle cannot stop from a less favorable underwriting decision.  Life insurance underwriters place a heavy weight on the health experience of your nearest relatives.  Mom or dad had a diabetes diagnosis at 45?  Sibling died of cancer at 29?  There go your hopes of achieving preferred plus (even preferred in some cases).  These situations are more likely to come up as each year passes.

Most Underestimate Their Need for Life Insurance

I've been selling life insurance for over a decade now, and Brantley nearly doubles that experience.  We've seen a lot of people evolve through life.  We also get a chance to review how people faired after years of executing their own plan for life.

Something about life insurance often comes up.  People buy too little and often think they won't need it nearly as long as they really will.

The “buy term only” crowd told you that you'd pay off all your debts and have millions by X date, but it turns out you still have obligations and not nearly enough saved by X + 5 years and…now what?

Buying some whole life insurance now while it's cheap could result in some insulation from the strong likelihood that you didn't buy nearly enough life insurance in general when you first purchased it.  Even I'm personally beginning to question the adequacy of the amount of life insurance I have.

Let's also remember that most whole life policies will increase in death benefit over the years.  This feature could combat your overly optimistic intentions when you originally bought life insurance.

Optimize Whole Life Insurance

Whole life insurance improves with age.  It becomes more efficient at creating both cash value and death benefit over time.  The sooner you buy it, the sooner you'll reap the rewards of owning it.

I bought whole life insurance before I had any serious reason to own it from a dependents point of view.  My current financial situation might cause some financial “gurus” to question my absolute need for life insurance.  I'm years into owning life insurance policies that I could never catch up on the benefits of today.

I'm sure someone out there in the financial blogging world would love to show me how I could have more money had I taken that money and placed it in some index fund of their choice.  No argument on that.  But what benefit I would get with that money today is questionable against what I might end up doing with options and opportunities life insurance affords me in the future.

What about Term Life Insurance?

If it's okay to buy whole life insurance when young with no dependents should you buy term life insurance?  That depends on your plans for the term insurance.

Because term life insurance exists today mostly to provide death benefit over a specific period of time, you might not want to buy term insurance when you have no dependents because you're burning precious years with no real need for pure death benefit used to recover lost income.

However, not all term life insurance buying motivations are the same.  Some people choose to buy term life insurance for the death benefit and for the eventual options to convert it to whole life insurance.  If a conversion is a consideration, then a lot of the above applies and purchasing term life insurance while young with little to no dependents could make sense.

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