Best Type of Life Insurance for 30-Year-Olds
Types of Life Insurance for Those in Their 30s
There are two main categories of life insurance: term and permanent. Choosing between these depends on your financial goals, budget, and family needs, and you might even find that a combination of both suits you best.
Term Life Insurance
Term life insurance is the most straightforward type of life insurance. It’s also the most affordable, making it a popular choice for families and those on a budget.
Duration: Term life insurance provides coverage for a fixed period, ranging from 10 to 40 years, depending on what you choose.
Coverage Amount: You can select an amount ranging from $50,000 to several million dollars, based on your financial needs and obligations. This is the amount paid to your beneficiaries.
Cost: The younger and healthier you are at the time of purchase, the more cost-effective the policy will be. Once you select a term, your rates are locked in for that duration, offering predictability and ease of planning.
If you pass away during the term, your beneficiaries receive the death benefit proceeds tax-free. However, if you outlive the term—which is what all families hope for—your coverage simply expires.
Most policies do give you the option to renew or convert the coverage if you decide you want to remain insured. Learn about how these options work: What Happens When Term Life Insurance Expires?
Permanent Life Insurance
Permanent life insurance refers to a category of life insurance policies designed to provide coverage for your entire life. This category includes specific types such as whole life and universal life insurance.
These permanent policies set themselves apart from term insurance with some unique features, but they are much more expensive.
Duration: Permanent life insurance provides coverage for your entire life.
Coverage Amount: Coverage amounts vary from $5,000 to several million dollars, based on your financial needs and obligations.
Features: Permanent life insurance offers attractive features such as cash value accumulation, potential dividends (in the case of whole life insurance), and flexibility in premium payments (with universal life insurance).
Cost: Permanent life insurance premiums are more affordable when you are younger and in good health. However, these rates can still be 10-20 times higher than term life insurance.
Get a more in-depth look at term, universal, and whole life insurance to help you determine which type is best for you.
Group Life Insurance
You might also work for a company that offers you group life insurance as part of your employee benefits package. The coverage amount is minimal, typically equal to one year’s salary, but premiums are often very inexpensive or free.
Take advantage and accept any free coverage your employer provides. This is a nice benefit, especially considering employers aren’t required to offer it. However, it’s best not to rely solely on this coverage if you have people relying on you.
Relying only on group life insurance has disadvantages:
The life insurance amount may not be sufficient to cover mortgage payments, childcare, educational expenses, and other long-term financial responsibilities for your family.
Your coverage is tied to your employment. If you change jobs, lose your job, or retire, you could lose your insurance coverage.
While initially cost-effective, the rates for group policies increase as you age.
Factors that Affect Policy Rates for 30-Year-Olds
Several factors influence the cost of a life insurance policy, with age and health status being the most significant. Fortunately, if you’re in your 30s, you’re generally viewed as young by insurance companies, and it’s less likely that you’ve developed chronic health issues.
Though insurance companies may weigh these factors differently, they commonly consider the following when determining your premium:
Age
Gender
Health
Tobacco use
Lifestyle habits, such as your alcohol and drug use
Family health history
Occupation and hobbies
Driving history and criminal record
After evaluating your application to assess your level of risk, life insurance underwriters will assign you a rate class (also called a risk class).
The most common risk classifications fall into one of three groups: preferred, standard, and substandard.
Preferred classes are reserved for the healthiest individuals and offer the best pricing.
Standard risk classes are for people with average health and life expectancy.
Substandard classes are for high-risk individuals.
Tobacco users have their own standard and preferred classes.
The Standard risk class is typically the starting point in life insurance underwriting. It represents an average risk compared to others within the same age and gender group. If you are healthier than average, you may qualify for preferred classes. If you’re less healthy, you may be assigned a substandard risk class.
The risk class you’re assigned determines how much your policy will cost. The less risky you are to insure, the better your rate. Below is an example to illustrate how your risk class affects your price.
