Recently I have met with a number of younger clients who are saving for, or have just bought their first home.
We always discuss the value of insuring when you are younger, and they are often shocked to see how much cheaper it is - not just now, but over the long term!
SAVE ON PREMIUMS NOW AND LONG TERM
When applying for insurance your age forms part of the calculation of the premium. The older you are, the more expensive the cover. This is because statistically speaking younger people are less likely to claim and are therefore, lower risk to the insurer.
When you apply for insurance you can lock in your age using an option called LEVEL premiums. This means if you get cover at 30, you will pay the premiums of a 30-year-old for the rest of your life!
You may be thinking “But I don’t need the cover now, I’m just paying more over the life of the policy”. Wrong, the earlier you get the cover, the cheaper it is long term!
Looking at premiums for income protection if you took it out at age 30, 35, 40, 45, and 50 - If you took out a policy at age 30, and held it until age 65
You would pay 6% less over the 35 years than if you took it out 5 years later (and had cover for 30 years)
You would pay 24% less over the 35 years than if you took it out 10 years later (age 40) (and had cover for 25 years)
You would pay 40% less over the 35 years than if you took it out 15 years later (and had cover for 20 years)
You would pay 44% less over the 35 years than if you took it out 20 years later (and had cover for 15 years)
You would pay 17% less over the 35 years than if you took it out 25 years later (and had cover for 10 years)
YOU WILL NEED IT IN THE FUTURE
You may not need much cover now, but consider how much the price will increase in the future – you can save a significant amount insuring younger, and also paying a more sustainable premium meaning you could actually afford the cover when you needed it most (once you have a family, mortgage, school fees etc).
In certain professionals such as doctors, lawyers, engineers, physios you can insure yourself for your future income, locking in the age now. This can have a huge impact on your long-term premiums.
There are also other reasons to take out insurance when you are younger:
YOU ARE HEALTHY When you apply for cover, you will undergo a medical questionnaire. With this information the insurer will assess whether they will offer you cover, or if you have any conditions if they accept them exclude them from your policy or increase the premiums (called loading).
While you are young and healthy, taking out quality cover means you can lock in your health now too – and once you have the cover (with a quality provider) they cannot cancel the policy on you!
(This process only applies to quality, underwritten cover, if you are unsure contact your insurer).
YOUR PARENTS AND SIBLINGS ARE HEALTHY
The insurer will also look at your immediate family history as well as your own, so while your parents and siblings are younger and healthier, getting cover is much easier. If you have a parent or sibling that had a serious hereditary condition the insurer may not offer you insurance.
YOU ARE INSURED
Illness, injury and mental health issues happen to be of all ages – and these concerns can put you out of work for extended periods – putting your career and life on hold!
According to the Australian institute of Health and Welfare, there is an average of 2-3 people aged from 15-24 diagnosed with cancer every day.
According to Beyond Blue, 1 in 35 people under the age of 35 are diagnosed with a mental health condition in Australia.
Getting insurance at a younger age means you have cover to take you through all that life throws at you – giving you the financial means to keep moving onto your goals and not fall behind.
There are many great reasons to insure yourself young – so the next big question is how much cover you should take out.
My rule of thumb is – take out as much cover as you need and that you can afford, today and in future.
That means you should insure yourself based on your needs (which may be future needs as well) – but don’t take out so much cover that you can’t afford it long term, because you’ll never see the benefits of a policy you cancel.
Personally, I still have the cover I took out 8 years ago when I first started in the industry, and it is unmatched in premium by a long shot!
If you would like to discuss taking out insurance, please get in touch at email@example.com.