Life insurance is not one-size-fits-all. There are different types of life insurance products available and most of them are easily customizable to fit your particular situation and budget. So what about for you? Which is better: term or whole life insurance?
You’re 30 and Looking for Life Insurance?
Turning 30 years old is a milestone. You can no longer say I’m in my twenties, which is a big deal. I turned 30 last year and I loathed the fact that I was no longer in my twenties.
Also, even though I’ve always been a fiscally responsible person, I panicked wondering if I was supposed to be doing more. I’m 30 now. I should have my life completely together.
My sister is two years younger than I am. She’s married and has a baby boy. I’m single with no kids—except my furkids. We may be on different paths, but we’re both where we should be. Turns out, the age you are doesn’t determine where you should be in life. As they say, age is just a number.
But if you’re 30-something and you’re here looking for life insurance, rest assured, you are already off to a great start.
Why Should I Buy Life Insurance in My 30s?
The younger you are, the more affordable your life insurance premiums will be. If you’re only 30, statistically you’re far from dying and health issues haven’t had too much time to creep in yet.
|Estimated Monthly Cost of a $250,000 30-Year Term Life Insurance Policy for Healthy 30-Somethings|
Life insurance is to protect those you leave behind. At all ages, we have people we care about and those who would be affected if we died—especially if the death is unexpected. While life insurance can’t help people heal emotionally, it can assist with the financial struggle your death may bring.
» Compare: Term life insurance quotes
Leading Causes of Death in Young Adults
You may feel great in your 30s, but you aren’t invincible. Life insurance is to protect against the what-ifs in life.
Obviously, if we all knew when we were going to die we’d buy a life insurance policy the day prior. Unfortunately, we don’t have this option
And although death is likely far off for you, you never know what tomorrow will bring.
According to the CDC, the table below shows the leading causes of death for 30-somethings in the United States in 2016.
|Cause of Death||Number of Deaths (ages 25-34)|
|1. Unintentional injury||23,984|
|4. Malignant neoplasms (cancer)||3,791|
|5. Heart disease||3,445|
|6. Liver disease||925|
|7. Diabetes mellitus||792|
|8. Cerebrovascular diseases||575|
|10. Complicated pregnancy||472|
See? We aren’t invincible.
Which Is Better Term or Whole Life Insurance?
Term life insurance definition:
Term life insurance is an affordable option if you need coverage for a specific period of time such as 10, 15, 20, 25, 30, 35, or 40 years. Your payment is the same for the entire length of the policy and the amount of the payout to your loved ones—if you were to die within the term—is fixed when you buy the policy.
Whole life insurance definition:
Whole life insurance covers your entire, or whole, life. The policy also accumulates a cash value over time and you can access these funds via loans. Whole life insurance is more expensive than term because of these benefits.
For most people, term life insurance is going to be the best option. It’s designed to protect your loved ones during their most financially vulnerable years and drop off when you’re nearing or at retirement.
» Learn more: Term vs. Whole Life Insurance
In Your 30s? I Bet You’re Busy.
Careers. Relationships. Family. School.
Millennials, which include us 30-somethings, work extremely hard. In a recent white paper by Cake & Arrow, it was stated that 21 percent of Millennials work more than one job to make ends meet and 75 percent report working more than 40 hours per week.
Millennials are working harder because while costs of living have increased, salaries haven’t. Those college loans need to be paid somehow! Over the past 30 years, the cost of attending college has risen 220 percent.
Not everyone wants to put off having a family until you’ve paid off all of your debt, like student loans, which is understandable, so making sure to budget in life insurance is important.
» Learn more: How to Fit Your Life Insurance Premium into Your Budget
John Smith and Jane Johnson bought a three-bedroom home in the suburbs to raise their daughter, Anna. Their mortgage is $250,000.
John is a 38-year-old copy editor who works from a home office. He makes a modest $45,000 salary but it’s worth it to him since he’s able to stay home with Anna who is four years old and only at preschool half days.
Jane is 34 and works as a nurse making $65,000 per year, but she has approximately $30,000 in federal student loans and $25,000 in private student loans, which are co-signed by John.
Both John and Jane decide to get life insurance to protect each other and Anna should either of them die unexpectedly.
Term life insurance is a great option for them. They both decide to apply for 25-year term policies. John applies for $500,000 and Jane applies for $750,000.
John’s 25-year $500,000 term policy will cost him approximately $37 per month.
Jane’s 25-year $750,000 term policy will cost her approximately $35 per month.
If Jane were to die suddenly, John would have enough money to pay the mortgage, take care of the private student loan balance, and provide for Anna.
If John were to die suddenly, Jane would have enough money to pay the mortgage, hire a nanny, and provide for Anna.
After 25 years, if John and Jane are both still alive, the coverage simply ends and they no longer need to pay their premiums. Anna would likely be out of college and on her own, and John and Jane just a few years from retirement.
Millennials still believe in the traditional way of life—marriage and children—but, compared to previous generations, we’re delaying these chapters until later in life, our late 20s and 30s. However, you don’t need to be married or have children to buy life insurance. Being in a committed relationship and owning a home together brings the need for life insurance. Owning a small business creates a need as well.
If you’re not sure the right amount of term life insurance for you, our life insurance needs calculator can help. Answer three quick questions and the tool will point you in the right direction.
» Calculate: Life insurance needs calculator
Is Whole Life Insurance the Best Option Right Now?
Again, most people only need term life insurance, but whole life insurance has its benefits. Like term life insurance, the younger you are when you buy whole life insurance the less expensive the premiums will be.
If you’re on a tight budget, we don’t recommend whole life insurance. Term life insurance will protect your family financially for a specific period of time with a much lower price tag; however, if you have a comfortable budget and are looking for other avenues to accumulate cash value, then you should consider whole life.
Whole life insurance provides financial protection for your family for your entire lifetime. It also generates a cash value and you have the option to participate in the insurance company’s investments and receive dividends.
» Learn more: Is Term Life Insurance Better than Whole Life Insurance?
Whole Life Insurance Cash Value Accumulation
With whole life insurance, the premiums you pay provide a death benefit for your beneficiaries, but a portion of your premium also goes toward building a cash value within your policy—similar to a savings account. This cash value is designed to equal the face amount of the policy at some point.
If you purchase a whole life insurance policy in your 30s, you can generate quite a substantial cash value. You can access these funds via policy loans to use however you wish.
It’s smart to not touch the cash value for many years so it can has time to really compound and grow. Some common ways to use this cash value include:
- Putting a down payment on a house
- Paying for a child’s wedding
- Assisting in paying expenses during your retirement years
There are even types of whole life policies, called Limited-Payment Life Insurance, that are designed to be fully paid off after a certain amount of time and then you can let the money sit and grow without needing to even continue paying premiums. These policies are higher in premiums, but can be extremely beneficial down the line if you have the necessary funds to pay for this type of policy.
Whole Life Insurance Dividends
With whole life insurance, you can also choose to participate in the insurance company’s investments. These whole life policies are more in premium than non-participating policies, but, similar to the stock market, the money you put in can produce great rewards. Also similar to the stock market, these dividends are not guaranteed; however, a handful of very good mutual life insurance companies have never missed paying a dividend to their policyholders in more than 150 years.
Dividends you receive can be used for anything, but it is common for policyowners to put these funds back into their whole life policy to continue accumulating the cash value. Some policyowners choose to use the dividends to pay their insurance policy’s premiums.
If you think whole life insurance may be a good option for your situation, we have a permanent life insurance expert in-house who would be happy to talk with you.
» Get quotes: Whole life insurance quotes
Ways Laddering Term Policies Can Help Protect You in Each Phase of Life
If whole life insurance isn’t right for you and you think a term life insurance policy may not be enough coverage, consider laddering policies. Laddering, or layering, term life insurance policies is when you buy multiple term life insurance policies, often with different coverage amounts, either at different times throughout your life or all at once with different term lengths.
Laddering Example One: Buying Multiple Term Policies All at Once
Jim is 30 years old and he and his wife, Pam, just purchased a home. They also plan to start a family this year.
Jim decides to buy a three term life insurance policies.
Policy 1 is a 35-year term policy with a coverage, or face amount, of $100,000. He wants to make sure Pam is financially protected all the way through their working years.
Policy 2 is a 20-year term policy with a coverage, or face amount, of $100,000. He wants to make sure that Pam can afford to pay the mortgage and start college tuition funds for their children even if he died unexpectedly.
Policy 3 is a 10-year term policy with a coverage, or face amount, of $200,000. This policy along with Policies 1 and 2 ensure Pam will have the necessary funds to continue their families’ standard of living during their children’s most formative years.
As the mortgage is slowly paid off and the children grow to become independent adults, their coverage needs also lessen which makes this laddering method a strategic one.
Laddering Example Two: Buying Multiple Term Policies at Different Times in Life
Blair is 30 years old and she and her husband, Chuck, are newlyweds. While Blair isn’t financially well-off and has a strict budget, she still wants to get a life insurance policy to protect Chuck if she were to die unexpectedly.
Policy 1 is a 10-year term policy with a coverage amount, or face amount, of $100,000. While it’s not much, it could take care of her funeral costs and the debt that she and Chuck share.
When Blair is 35 years old, she and Chuck have saved up for a down payment and purchase their first home. She decides more life insurance is needed to help Chuck continue to pay the mortgage if she died unexpectedly.
Policy 2 is a 30-year $100,000 term policy to financially protect Chuck during the entire length of their mortgage loan.
At 55 years old, Blair and Chuck are just a decade from retiring. She decides to purchase another inexpensive term policy to ensure Chuck would not need to dip into his retirement funds to continue to pay bills if she dies prematurely.
Policy 3 is a 15-year $100,000 term policy with a coverage, or face amount, of $100,000.
» Learn more: Laddering Multiple Life Insurance Policies
If you’re interested in learning more about whether you should purchase term life insurance or whole life insurance, our in-house experts can help. We can discuss your needs and budget and help you come up with a plan.
Buying life insurance in your 30s is a great way to lock in affordable rates and protect your loved ones for years to come.
» Compare: Term life insurance quotes
About the writer
Natasha Cornelius, CLU
Senior Editor and Life Insurance Expert
Natasha Cornelius, CLU, is a writer, editor, and life insurance researcher for Quotacy.com where her goal is to make life insurance more transparent and easier to understand. She has been in the life insurance industry since 2010 and has been writing about life insurance since 2014. Natasha earned her Chartered Life Underwriter designation in 2022. She is also co-host of Quotacy’s YouTube series. Connect with her on LinkedIn.