I Got Life Insurance When I Was Only 33 Years Old. Here's Why

First of all, the title of this article makes it sound like 33 is a young age to get life insurance. It's not. If you're married or have children or anticipate either of those major life milestones happening in the not-too-distant future, there's a good chance you need life insurance, even if you're still in your 20s.

In my case, my first child was born when I was 33 years old. I set the life insurance application process in motion and had coverage in place before I was even back at work from paternity leave.

In fact, the only reason I waited until 33 and didn't get coverage until we had children was because I previously had a modest insurance policy through work and my wife's salary was roughly the same as mine. And although we got married when I was 31, we weren't 100% sure we were going to have children. In short, without kids to pay for, and with virtually no debt at the time, if something unfortunate had happened to me, my wife would have been okay financially. But having kids changed that.

When should you get life insurance?

There are two big reasons to get life insurance. First and foremost, you can make sure your loved ones are taken care of financially in case anything happens to you. Second, if you die and have debts, you don't want your spouse or kids to "inherit" those debts, which generally must be paid out of your estate before your assets can be distributed to your next of kin. So, the short answer is that once you are married, and especially if you have children, you should consider life insurance.

If you're single with no dependents, there's a solid case to be made that you don't necessarily need life insurance. But if you anticipate your situation changing at some point, keep in mind that the younger you are, the easier and cheaper life insurance is to obtain.

For example, let's say that you want a $500,000, 20-year term life insurance policy and that you're a male non-smoker in good health. The average cost for this type of policy is $225 per year if you obtain coverage at age 30. At age 40, it's more than 50% higher.

What type of life insurance should you get?

There are many different companies that offer life insurance, and most have several products with different names. But most life insurance policies fall into two different categories -- term and whole life.

The short explanation is to think of term life insurance as temporary coverage. If you buy a 20-year term life insurance policy and you die within the 20-year period, your beneficiaries will get paid. If you don't, the policy will expire and won't have any value. Whole life insurance, as the name implies, covers you for your entire lifetime. Plus, whole life policies build up cash value over time. The caveat is that whole life insurance premiums are much higher than you'll pay for comparable term life coverage.

In most cases, I'm a fan of term life insurance. That's what I have and it's what I've advised most clients over the years to get. Most people don't need life insurance past a certain point (when you're retired, kids are out of the house, etc.). Plus, if you want to build cash value, you can take the difference you'd pay in premiums and simply invest it in low-cost index funds.

To be clear, this isn't meant to be personal financial advice for you. A smart idea would be to contact a Certified Financial Planner™ and set up a brief consultation, as they'll be required to give advice that is in your best interest (as opposed to an insurance salesperson, who earns a commission based on what they sell you).

The bottom line is that although the likelihood of something happening to you when you're young is relatively low, you still want to make sure that your loved ones are protected in case it does. A financial planner can be an excellent resource to let you know if you need life insurance, how much you should have, and what the best type of insurance is for you.