Life Insurance: Can You Afford to Wait?

by Maureen M. Kesler

With adulthood comes a number of exciting changes. Perhaps you have decided to buy a home, get married, or have children. These decisions require careful consideration, as they can irrevocably change your life. One decision that’s easy to delay or overlook is the decision to purchase life insurance. What you may not realize, however, is that delaying the purchase of life insurance can be a costly mistake for you and your loved ones. Waiting just a few years can have a negative impact in several key areas. Whole life offers financial protection and cash value accumulation. In its simplest form, whole life insurance protects the people who depend on you for financial support. Aside from providing money to your beneficiaries to replace your income, should you unexpectedly die, whole life insurance also offers guaranteed* cash value accumulation on a tax-deferred basis, as long as the policy remains in force. If available, cash value can be borrowed against to fund a child’s education, supplement your retirement income as the life insurance needs decrease, or meet an emergency cash need. Remember though, that policy loans accrue interest at the current variable loan interest rate and reduce the total cash value and total death benefit by the amount of the outstanding loan plus interest.

The effects of waiting. Since a portion of the premiums paid accumulates cash value each year, over the long term this accumulation can be considerable (especially since taxes on the growth are deferred). So the sooner you start paying policy premiums, the faster your cash value may grow.

A whole life policy is also eligible to receive dividends, if and when they are declared by the insurance issuer. Unlike cash values, dividends are not guaranteed. As a policyholder, you have several options for dividends usage: you can take dividend distributions in cash, for example, or you can use them to purchase additional paid-up life insurance. Paid-up insurance is also eligible for dividends, has cash value, and requires no additional premiums. So waiting to purchase insurance could cost you the opportunity to increase the cash value of your policy and the benefit paid to your beneficiaries.

Perhaps you’re healthy now and you’ve decided to delay the purchase of life insurance for a few years. However, in these few years you may suffer unexpected health problems that could put your insurability in jeopardy. In a worst case scenario, if you were to unexpectedly die, the cost of waiting would be the lack of a death benefit for your loved ones.

*Guarantees are backed by the claims-paying ability of the issuer.

Remember, purchasing life insurance is a major decision. So it’s important to take the time to gather the necessary information and choose the coverage that best suits your needs. While the decision is ultimately yours, keep in mind that postponing your decision can prove to be costly.

This educational third-party article is provided as a courtesy by Maureen M. Kesler, Agent, New York Life Insurance Company.

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