Ask The Hammer – When to Buy Life Insurance

Key Takeaways

• Buy life insurance when major life events occur (marriage, home purchase, birth of children) or proactively while young and healthy to lock in lower premiums and guarantee insurability before potential health issues arise
• Conduct a detailed needs analysis rather than using the '7x income' rule of thumb, since younger earners typically need more coverage due to decades of future income replacement needed
• Choose term life insurance (5, 10, 20, or 30-year terms) for protection purposes because you can afford significantly more coverage for much less money compared to whole life policies
• Consider a hybrid approach: use term insurance as your primary protection tool, and only add whole life insurance if you have specific needs beyond death protection, such as building a cash reserve for estate planning
• Go beyond basic needs analysis and perform a 'wants analysis' to determine the lifestyle standard you want to maintain for your family—this personal choice should guide your coverage amount