What Type of Life Insurance Fits My Life Stage?

The type and amount of life insurance you get will depend on your life stage, responsibilities and financial situation. Here’s a guide for what kind of insurance to choose.

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Life insurance is a way to prepare for the unknown by providing financial security for your loved ones when you’re not around to do so. The kind of life insurance you may consider and how much depends on your stage in life, responsibilities and financial situation. While each person is unique, let’s look at some of the general reasons you might need insurance and what kind is best-suited for your life stage.

Young Adults: You are in your 20s, just starting your career and are single with no family responsibilities.

As you start your career and begin to establish yourself professionally, there are many goals a life insurance policy can help you achieve.

  • A Permanent life insurance policy might be best for you at this stage. It stays with you for your entire life. This kind of insurance provides lifelong financial protection while you are healthy and young. It can also provide a variety of opportunities for saving and accumulating wealth.
  • Many non-participating Whole life insurance products provide you with potential savings after a certain number of years – typically three to five years. This additional income can be used to pay down life insurance premiums in future years, can be borrowed against in instances like buying your first home, can be accessible in case of a financial emergency or be paid out if you need to cancel the policy early.
  • A participating Whole life insurance product provides similar guaranteed growth in cash value where your premiums are pooled in a separate account with other policyowners. The investments are professionally managed and the growth can be used in a variety of different ways. Examples include using proceeds as a form of savings, paying down premiums, purchasing additional insurance or purchasing other types of insurance.

Your 20s are the best time to get this type of coverage, since life insurance is most affordable when you are younger and healthier.

Young Families: You have young children or are planning a family. You also might have a mortgage and other debts.

Young families are at their peak earning years, and typically this is when there are both short-term and long-term expenses. Covering debt obligations, maintaining a standard of living and affording post-secondary education in the future are the primary goals of obtaining coverage through a life insurance policy at this stage of life. This is a good time to start thinking about estate planning and consider the impact a disability could have on your ability to earn an income. Disability insurance can ensure that everything you have worked so hard to provide is paid for and uninterrupted. Similarly, a critical illness such as a heart attack, stroke or cancer, may require changes to your home, way of living and treatments. Critical Illness Insurance will pay a one-time payment once diagnosed to assist in these costs and protect your savings.
In some cases, a layered approach, one that mixes short- and long-term solutions, may be the best way to achieve these goals in the most cost-effective manner. A licensed life insurance advisor is best-suited to help you determine what mix of term and permanent products would be best for you and your family.

Settled Families: You are in your late 40s or early 50s. Your children are older, but still financially dependent. The mortgage is mostly paid off and you have savings and a healthy retirement account.

At this stage in life, there is still a need for a life insurance policy. Term policies, like 10- and 20-year products can be a good option to ensure your family can maintain its standard of living without tapping into savings in the event of an untimely death. Term policies can be used to ensure any debts, such as mortgages, loans, education costs and other expenses, are not passed to your loved ones in the event of your passing.
A licensed life insurance advisor can help determine what policies are best to help ensure you family is taken care of the way you intend later in life.

Retired Individuals: You are empty nesters, retired or planning retirement and are debt-free. You may have substantial investments for your retirement years.

For this stage of your life, it is good to consider estate planning and the most appropriate way to cover final expenses. A small amount of Permanent life insurance could help cover your funeral and burial costs, ensuring that your family is not burdened financially. Since most of your financial obligations, like mortgage, debts and secondary education costs, have been met, your need for insurance will likely be lower than earlier in life. If health is a concern, there are many affordable and comprehensive options for insurance that require just a few questions to be qualified. No medical exam, no blood, just a simple application in as little as 20 minutes can ensure you are protected.

This is also a great time to consider a participating or non-participating Whole life insurance policy for your grandchildren. It’s a great way to ensure they have insurance protection while they are young. You can purchase a plan that will be completely paid for in as little as eight years, and it provides them with a bonus of savings that they could use for a first car, down payment for a home, or the wedding of their dreams.

Remember, these groupings are merely guidelines and your personal situation may merit a different solution. To ensure that you get the best life insurance coverage for your needs, speak to a Licensed Life Insurance Advisor at CAA. Connect with an Advisor by calling 1-888-444-6711, or book an appointment online.