Life Insurance Policy
Taking out a life insurance policy: at what age is it better to think about it ?
Taking out a life insurance policy: at what age is it better to think about it? Too young to think about a life insurance policy? It is not at all certain. It cannot be said that there is “a right age” to decide to take out insurance: the choice depends, rather, on a series of variables, independent of age. In general, the evaluation of adherence to a life insurance policy falls within the broader theme of financial planning of one’s assets.
It is an articulated process, which includes the analysis of short and long-term goals, the ability to achieve them and possible adverse events that could jeopardize their achievement.
Once the overall picture has been outlined, the most suitable insurance-financial solutions can be identified to protect, manage and increase assets, always keeping as a point of reference the adequacy of the choices with respect to their own risk profile. In this context, the life insurance policy is the solution that makes it possible to protect loved ones, at least on an economic level, in the event that an adverse event occurs such as the premature death of those who represent, in the family context, the main source of income.
Life Insurance Policy 2023
After the Covid emergency, there was a strong increase in the demand for life insurance policies, probably due to the greater sense of vulnerability generated by the epidemic. This renewed interest has affected the population in general, but also the younger group, the Millennials. Life policies: why think about it from a young age Does it make sense for a healthy boy to think about taking out life insurance?
Many ask themselves, but, as we said, it is not so much age that determines the need for protection of this type, as the need to create a safety net for one’s family or for oneself. In fact, it makes sense to have an insurance solution when there is someone (your partner, children, loved ones) or something (your future pension plan, a project to be implemented) to be protected1, at any age. Based on the type of protection you want to activate, you can choose full-life or fixed-term life policies.
The first, for a whole life, guarantee the transfer of a certain capital to the beneficiaries identified by the policyholder, in the event of the death of the insured (which may or may not coincide with the policyholder himself) regardless of when it occurs. In the event of premature death, this solution allows the partner, children, parents or, in general, the beneficiaries, to have support at least in dealing with small or large expenses (the home loan, school costs, charges related to the activity), avoiding that in addition to having to face the loss of a loved one, they also have to find themselves in a situation of vulnerability on the economic front.
Term Life Insurance
Fixed-term life policies, on the other hand, allow beneficiaries to receive the sum insured in the event of their departure during the term of the contract. In the event that the adverse event does not occur, the same contractor can access the value of the amount invested. In this case, therefore, the protection is twofold, because this solution can also be used in terms of social security or to carry out a project or an important expense.
In any case, the age of the contractor is a secondary aspect in the choice of subscribing to a life solution: the objectives to be achieved are fundamental, on the basis of which to choose the most suitable solution. The advantage of a long-term time horizon There is also one aspect that rewards young people, namely the possibility of setting a long-term time horizon. Life policies, in fact, have a dual nature: they are not only insurance instruments that protect against a risk, but also represent an opportunity to manage assets, thus diversifying one’s investment portfolio.
When it comes to investment, one of the determining characteristics to be defined is precisely the time horizon, or the period of time for which you “renounce” your financial resources to invest them. Also in this case, the choice between a short-term horizon (from less than one year to 5 years) or a medium-long term (from 5 to 20 years and beyond) depends on the objectives and the risk profile “it is good that the investment is low-risk and, therefore, mainly tends to conserve capital: the short time period, in fact, would not allow us to recover any losses ” it possible to offset any losses due to negative market trends”.
In general, the long term is identified as a time frame that allows you to meet the needs for growth in assets, from a pension or provisioning perspective for your family, and allows you to better diversify the risk. An analysis in Il Sole 24 Ore3 showed, for example, that in the last 145 years only a very long time horizon (20 years) has guaranteed real returns that are always positive in the USA. This does not mean that this is always the case, because the history of finance teaches that certain predictions cannot be made by looking at the past, but it is certainly an interesting indicator.
Life Insurance Policy
Maintaining the investment over the long term allows you to take advantage of the composition of interests, or the possibility of reinvesting the returns obtained, creating an extra-return that becomes larger the longer the time horizon. Furthermore, it makes it possible to focus on macroeconomic issues that develop over the long term (for example new technologies, emerging countries),
which are protected from short-term fluctuations. Finally, having a broad horizon protects you from the anxiety of volatility and from the decisions taken on the wave of market sentiment.
According to Il Sole 24 Ore4, which launched a project to spread financial education among young people, “those who are younger have an enormous advantage: time ahead of them, to have their money re-evaluated over the years and have more when will serve. When we stop working or when at a certain point we could decide, thanks to the nest egg set aside, to change direction and start a new business.
The basic assumption is that in the long term, stock market fluctuations lose relevance and the value of the main companies listed on international lists always rises: in the last ten years, the MSCI World index, which represents all listed shares, has revalued by 120%, with an average of 12% per year ”. Obviously, the time horizon is not sufficient to eliminate the risk inherent in the investment, but, accompanied by an efficient diversification strategy, it allows it to be managed.
Young people therefore have the possibility of being able to optimize the time factor, setting their own time horizon even well into the years. An assessment to be taken into consideration when evaluating the possibility of choosing a life policy, which, precisely for those with fewer springs on their shoulders, allows you to associate insurance protection with the advantage of a long-term investment.