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WHAT IS THE RIGHT AGE TO GET LIFE INSURANCE? – INDUSTRY EXPERTS HAVE THEIR SAY

“Son, you have just turned 22, and have started your first job. I don’t know too much about life insurance, but shouldn’t you go and find out when you should purchase one?”

The last thing on a young person’s mind is getting life insurance – he’s got to save for a car, and get some furniture for his first apartment, and so on.

STARTING YOUNG?

Let us find out from the experts if it is really worth starting life insurance at an early age.

Strictly speaking, the best time to buy life insurance is straight after birth. Why should that be? Well, life insurance is very much connected to time i.e. with each passing year, a policy becomes more costly.

Mikayla Collins from NFB Private Wealth Management very much supports the idea that one should start with life insurance as young as possible.

It is only human to postpone the idea of getting life insurance at an early age, as there seems to be more pressing financial issues. However, purchasing life insurance early will be greatly appreciated later in life. This is according to Peter Dempsey, Deputy CEO of the Association for Savings and Investments South Africa (ASISA). The following reasons are provided in support of starting with life insurance when you are twenty or so.

YOUNGSTERS ARE AT THEIR GREATEST RISK

Why should those in their twenties be at such a high risk? Well, the chances of them being involved in an accident that results in death or disability is really great. Statistics South Africa showed that in 2013, death rates reach a high in people falling in the range of 20 – 34 years. A staggering 42% of all deaths occurring amongst the 15 – 29 years group was due to unnatural causes, such as road accidents and other accidents. Of course, going along with these deaths is the fall-out of possible serious injuries and disabilities.

TO BE YOUNG MEANS YOU ARE AT YOUR BEST

A great advantage that the young generation has over the “oldies” is that their health is more likely to be at its greatest, and this is an ideal advantage for getting life insurance easily and at a reasonable rate. The older you get, the greater the chance of ill health creeping in is, one way or another, and you’ll have to pay for that in the form of higher premiums. You may even be refused life insurance if you are not so healthy.

ASISA conducted an insurance Gap study in 2013, showing the gap between those insured and all those who actually need to be insured. This study showed that people were underinsured for life cover to the tune of R9.3 trillion. That’s a massive amount of underinsurance. Insurance can be likened to lying on the beach sun-tanning. It is no good putting on the sunscreen after you have already been badly burnt.

ASISA recommends that the first insurance cover young people need to get is a disability cover, as they are not only at the greatest risk of becoming disabled, but are also financially extremely vulnerable. The younger you are when becoming disabled, the greater the financial amount you would require to maintain living. Older people have typically already put away some kind of pension, so they are financially stronger.

YOUNG PEOPLE ARE MOST LIKELY TO HAVE CONSIDERABLE DEBTS

When you are in your twenties, there is probably no way that you will have enough saved to settle your debts. Starting out in life means that you may already have a university loan to pay off, as well as “that car”. Then you have to pay for accommodation and so the list goes on. Because you are starting off with your first job, you will likely be at the “bottom of the ladder” so to speak, and won’t be earning that much to start off.

It is all very well should you die, as you will no longer be here, but what about your loved ones who are left behind holding your debts? It will be worse if you are disabled, as the burden is even greater for your loved ones, who may have to care for you for life, because you can’t earn anything.

So, according to ASISA, to have adequate protection from the above scenario, young people need to get enough life insurance, for instance.

STARTING A FAMILY – WHAT ARE THE IMPLICATIONS?

It was relatively easy when you were on your own. Life was quite straightforward as it was just you to think about. But now you are sitting with a wife and two children. The picture has changed quite drastically, because for the first time you have people that are financially dependent on you. Should you suddenly die, who is going to take care of your precious little family? Actually, it is awful to leave them in such a pickle.

It’s important to note that, compared to death, disability is a double-edged sword, because not only do you need to pay for all those debts, but now you are no longer able to earn an income possibly for the rest of your life. We’re talking about massive amounts of funds that are needed here. Just to show the magnitude of this type of situation – in June 2015, insured people received R366.8 billion in pay-outs of life insurance benefits. If those people had not been insured, they would have lost out by that amount, and debts, day-to-day living expenses, school fees and medical expenses would have all gone unpaid.

Sources:

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