Life Insurance For a 30-Year-Old, Guide to Coverage

Life insurance is without a doubt one of the biggest financial debates, to buy or to not buy? And when you are in your thirties, you might be torn between whether you need it or not. From buying a new house to starting a family, getting a steady income source or advancing your career, and getting married, there are a handful of reasons why you need life insurance.

When you are in your early thirties, then it’s probably the perfect time to purchase a life insurance policy. It is a very affordable, practical, and impactful age, not to mention that if you are in great health then it will be easy to find a good life insurance policy. Unfortunately, for most people finding the appropriate policy is the hardest part. Before you delve into any particular product, you need to understand what life insurance is. Here is a quick rundown of the different types of life insurance.

Types of Life Insurance

When choosing a life insurance policy, you have two major options to choose from. These are term life and permanent life insurance. Term life policies run for a specific period of time hence provide coverage for a defined time length which is decided beforehand. Permanent life policies are the opposite of term life policies as they provide lifelong coverage for the policyholder. Below is a classification of these types of life insurance policies.

Term Life Insurance

Term life provides coverage for a stated number of years which usually lies anywhere between 5-30 years. Most of these policies have level premiums which means that the amount you pay does not change along the life of the policy. The premium amounts are dependent on the amount or type of policy you choose. 

For instance, you could choose a 15-year term life insurance policy and when you die within that specified term period, the policy benefits are paid out to your beneficiaries. On the downside, if you outlive your policy then your beneficiaries don’t receive any payout from the insurer. This leaves you with three options. You can either leave the policy to terminate, convert it to a permanent policy, or renew the existing policy for another term.

While a lot of permanent life insurance policies offer a cash value, term life insurance does not, but only works to provide a payout to your beneficiaries once you die. This results to lower premium rates which would be very attractive to a young family that is just starting out. This is one of the biggest benefits of having a term life insurance policy as it gives a substantial amount of coverage at relatively affordable premiums.

Permanent Life Insurance

Permanent life insurance refers to life insurance that offers coverage that does not expire. Unlike term life that only provides coverage for a specified period of time, permanent life provides you coverage for the rest of your life. There are usually two main types of permanent life insurance; whole life and universal life, although there are additional subcategories.

Whole Life Insurance

Whole life is the most common type of permanent life insurance. It is customized to provide coverage for the rest of your life, so regardless of when your death occurs, your beneficiaries will receive a death benefit. They have higher premiums because they provide a death benefit amount alongside a savings component which is also called the cash component. The premiums remain the same for the rest of the policy, and the death benefit amount is guaranteed as long as these premiums are paid.

The cash value component is formed from part of the premiums paid. Usually, this cash value component grows at a guaranteed rate and offers a few benefits for you before you die. For instance, while it might take a few years before it grows, you can borrow a loan against it without affecting your policy. You can also use this amount to pay for premiums or even surrender the value to use as your retirement plan.

Since you cannot outlive a whole life insurance policy, your loved ones are guaranteed a payout. In most cases, this type of life insurance is used for estate planning and funding generational trusts.

Universal Life Insurance

Just like whole life insurance, universal life insurance provides lifelong coverage and besides the death benefit, it also has a cash value component. The only major difference between the two is that universal life insurance has flexible premiums. You can increase or decrease the amount of premiums you pay depending on your current needs as long as it lies within the limits required by the policy.

This is a huge advantage of this policy since it is adjustable according to your current life circumstances. When an excess amount is paid to the policy, it is added to the cash value component. As long as there is enough money in your account, you can always alter your premiums. The downside of reducing or stopping the premium payments is that the amount of savings accumulated usually reduces, and this might end your policy.

If your economic situation has changed and you cannot afford the current premium payments, make sure to consult with your agent to ensure that you have enough cash value to pay for the monthly charges. 

Simplified Issue and Guaranteed Issue

Most life insurance policies require the applicant to undergo a medical exam. This is also known as an underwriting process that the insurer uses to ascertain the risk associated with insuring you. But with the simple issue and guaranteed issue, there is no underwriting process needed. As such, these life insurance policies are most appropriate for individuals with serious health conditions that might prevent them from qualifying or for old age people.

While they are mostly classified as permanent life insurance policies, they also partially fall under term life insurance. In fact, most term life and final expenses life insurance policies are usually a guaranteed issue or simplified issue. While there is no medical information (exam or questionnaire) required for you to qualify for a guaranteed issue, you will be required to fill out a medical questionnaire to qualify for a simplified issue.

The insurer assumes there is a high risk of providing coverage for both simplified and guaranteed issues. This results in lower coverage and higher premiums when compared to other forms of life insurance.

Variable and Variable Universal Life Insurance

A variable policy refers to life insurance that increases over time and has flexible premiums. However, the cash value does not offer a guaranteed rate of return. This amount is usually invested in sub-accounts within your life insurance policy, which are normally mutual funds that constitute investments in different asset classes.

It is hard to establish the growth or loss of the cash value account since it is dependent on the market performance of the variable accounts. On the upside, the policy owner has the freedom to choose the sub-accounts that the cash value will be invested in. When compared to universal life insurance which is almost similar to variable universal life, the stock market performance is better than the guaranteed accounts of universal life insurance. 

Variable universal life insurance also has its risk because when the stock market declines then it results in a poorly performing policy. Also, with a variable life insurance policy, you will not be allowed to take out a loan against the policy. You can surrender the policy for its cash value but surrender charges will apply. Similarly, you’ll incur withdrawal charges for your policy.

Life Insurance for a 30-year-old Male

Now that you’ve attained 30 years and wish to take out a life insurance policy, you will pay more for the same amount of coverage as you would have in your 20’s. That is how life insurance works, the older you get, the more premiums you pay. Also, as a 30-year-old male, you are going to pay a higher amount when compared to a female your age.

It is perceived that the mortality rate of men is higher than that of women, and this affects the life insurance rates they pay. This is based on most professions that are male-dominated and considered high-risk, eg firefighters, pilots, police, and miners as well as risky hobbies that men are most likely to engage in like car racing or scuba diving, etc. This is the kind of information that insurance providers use to calculate the risk of insuring an individual.

This does not necessarily mean that all men take part in such activities or occupations and that women don’t, it just means that they are more likely to do so although there is a part of the demographic that presents a lower risk. While it might seem unfair, gender is just one of the factors used for consideration as other individual aspects such as health, age, and habits are taken into account when determining the policy premiums.

Cost of Life Insurance for a 30-year-old Male

The cost a 30-year-old male would incur for a life insurance policy would be higher than that of a younger male but also lower than that of an older male. Age is just one of the factors used to consider the cost of premiums paid for a policy. Other factors used to calculate the cost of life insurance include occupation, hobbies, health, smoker or non-smoker, family medical history, and lifestyle, etc.

The cost will also be dependent on the type of life insurance policy. Term life insurance policies are cheaper when compared to permanent life insurance policies. For instance, a 30-year old man paying about $25 monthly for a 20-year term policy with $500,000 coverage would pay about $375 monthly for the same amount of coverage for a whole life policy. The rates are not fixed to a specific range but will vary depending on the insurance company.

If you want a lower amount of coverage, ie $250,000 for the same term length then you would pay about $16per month and for $1million in coverage about $41 monthly. 

Life Insurance for a 30-year-old Female

Most men are the breadwinners of their families and might need to be the party that takes out life insurance that would later replace their income when they pass on but that does not mean that women cannot also have life insurance policies. A 30-year-old female could take out a life insurance policy to supplement that of their spouse or in other instances where the individual is a single mother then it would act as income replacement for their kids.

As mentioned, life insurance for females is not necessarily the same as that for males. Women tend to pay lower rates for the same amount of coverage that a similarly-aged man would pay for. 

Cost of Life Insurance for a 30-year-old Female

Given the same 20-year term period and a coverage amount of $500,000, a 30-year-old female would pay a monthly cost of about $21. For $250,000 for the same policy length, they would pay about $14 monthly while coverage of $1million would cost $32 monthly. If it is a whole life policy, they would pay about $189 monthly for $250,000 coverage or $374 monthly for $500, 000 coverage.

Wrap Up

The reason why you want to purchase life insurance could be one of the major motivators like mortgage, young family, and a climb up the career ladder, etc. On the other hand, perhaps you are just a proactive 30-year-old who wants to lock in a policy before the rates start rising.

Either way, you want to be able to choose an affordable and high-quality life insurance policy that fits your needs. Before making any deposit for a policy, you need to first shop around and ensure that you find a suitable life insurance product based on your current household needs and what they will possibly look like in the future.

While life insurance can be confusing, you can shop around with CFA insurance. With your best interests at heart, we want to ensure that you find a life insurance policy that will suit you. We will provide you with a wide range of life insurance products and walk you through the different options you have. You don’t have to do any paperwork as we do it all for you while making your process of acquiring a life insurance policy as easy as possible.