Insurability, like life (and love!) can be ephemeral. Just as we are not guaranteed tomorrow, neither are we guaranteed our health; it can disappear in an instant.
That is why I’m amazed when I hear “I’m interested, but now is not a good time. Call me in six months.” Really? Unless you’ve just had triple by-pass surgery or are getting ready to climb Mt. Everest, now is probably the best time.
An excellent example of this is the book The Diving Bell and the Butterfly. The author was 43 years old and the editor-in-chief of French Elle when he suffered a debilitating stroke. He was unable to speak and could only move his left eyelid, and yet he figured out a way to write the book. (In addition to perfectly illustrating the concept of insurability, it is an excellent book to read when we’re in a “woe is me” kind of funk.)
Young people have the ability to lock in their insurability with term insurance, even if they are unable to afford the premium on a whole life policy. The term premium for a $1,000,000 policy on a healthy 25 year-old male is initially less than $400/year. It can then be partially (or wholly) converted as needs and income change.
And yet insurability is almost always overlooked. People say that they’ll apply when they stop smoking/lose weight/lower their blood pressure, thinking that they will get a lower premium. But that’s not always the case. Let me explain.
Of course healthy non-smokers enjoy lower premiums than unhealthy smokers. And as you know, older applicants pay a higher premium than younger ones. But what you may not know it that when a premium reduction is granted for whatever reason (smoking cessation, weight loss, etc.), the new premium is at the age on the original policy.
So yes, if you wait a few years until you stop smoking/lose weight, you will receive a lower premium than you would have received a few years before when you were still a smoker/overweight. But it will be higher than had you procured a smoker’s policy and then quit smoking.
However, the biggest risk in waiting is the insurability factor. The above scenario assumes the same health status at both ages, but as we know, that’s not guaranteed. So attempting to save a few dollars could backfire and wind up costing more, or worse, becoming uninsurable.
Nothing can beat young and healthy when it comes to life insurance premiums. Unfortunately, since a minority of young and healthy individuals sees the need for life insurance, most end up paying more, and in some cases much more, than is necessary.