What Is the Best Age to Buy Guaranteed Universal Life Insurance?
The quick answer to this question is that there is not one best age to purchase guaranteed universal life insurance, but a range of ages where it probably makes the most sense.
To find this range, we’ll take a look at premiums for a wide range of ages and health ratings for both men and women.
In all of the examples, the premiums are paid for only 20 years. You could pay them over a longer period of time to get lower premiums, but a long premium paying period with guaranteed universal life insurance is not always advantageous.
The premium graphs below go from age 18 to 80 and have five different health classes – three non-smoker classes and two smoker classes.
“S” stands for smoker and “NS” stands for non-smoker. Lower numbers within each group are healthier.
The actual dollar amount of the premiums has been left off, since they are not all that important (they will vary by death benefit, but be close to proportional) and will vary from company to company.
What is more important is the shape/trend over time. You can see that increases from year to year start out relatively modest and then increase over time.
It’s helpful to plot the smokers and non-smokers on separate axes so that you can see the trends better:
Just eyeballing things, it looks like there seems to be relatively small annual increases up until the late 40s, modest increases through the 50s (and maybe early 60s), and steeper increases thereafter.
What this means is that guaranteed universal life insurance is affordable for a long time period. Even though it is very inexpensive at young ages, you must consider your opportunity cost/other uses of your money. It would probably be more wise to purchase term insurance (convertible) when you are young and use the remainder of your money for something else.
That way, your underwriting is locked in, so you could always convert the term policy later if you want to. You can use the premium savings for investing, paying down debt, etc.
We can get a little bit more precise and look at the percentage change in premium by age:
Aside from the sinuous path taken by one of the male smoker classes, the percentage change in premium consistently increases from year to year. (And even in years where the percentage goes down, the premium is still increasing since the percentage change never goes negative).
You can also see that the percentage increases are relatively modest for a wide range of ages.
Similar conclusions can be drawn for women, except their percentage increases tend to be a little bit smaller than those for the men.
If you are very young, you should probably buy term insurance. It is cheaper and will allow you to accumulate the remainder of your funds elsewhere. And, you can always convert down the road.
The mid 40s to the early 60s are probably the sweet spot. The premiums are still reasonable, and by that point you should know if you want or need a permanent death benefit.
These are just general guidelines, and obviously everyone is going to be different. It could be that guaranteed universal life insurance is a good fit for someone younger or older than these ranges, or perhaps never at all, depending on the circumstances.