If you want one of the two things life insurance does well then yes. Getting a life insurance policy.
Life insurance is a tool like any other tool, when you need a Phillips Head screw screwed into the wall then a Phillips Head screwdriver is awesome.
Life Insurance does these three things well, so if you need them then yes it is smart:
1) Bank alternative for your rainy day fund or emergency fund. banks pay nothing but single premium life insurance with a full return of premium and no surrender penalties pays up to 12% per year with not losses at all currently
2) Income replacement for a spouse or loved ones. If you are married or have a special needs sibling etc that your care for you can make sure that whomever cares for them if you should pass away has all the money they need to do the job the way you want them to.
3) Market-Like growth followed by tax-free distributions (all other strategies are allowed to call this income) in retirement. No joker broker, with the portfolio of mutual funds an blah, blah, blah, can beat a properly structured life insurance policy in this area. I’ve posted that I will meet any of them, any day, on any TV show and go head to head and none have come out of hiding to prove they know what they are doing.
5 year term insurance
If you want a hole in the wall you should use a drill. If you want your emergency funds to make money or to take care of someone if you should pass away or to create tax free money to use to pay bills in retirement then you should use insurance. It just has to be prepared by a master or you get screwed.
Thank you, Deepti, for the A2A. “Is it smart to get life insurance at 18?”
It depends. Ask yourself the following questions before seeking a quality permanent life insurance policy at age 18.
Am I likely to qualify for substantial coverage based upon my income potential, vocation, education, and employment?
Am I committed to paying the premiums long term?
Do I have any other life insurance policy to cover basic end-of-life expenses such as a small policy that my parents may have purchased?
You may have other considerations to reflect upon before deciding to budget for life insurance premiums at the age of 18.
It is a rare 18-year-old who chooses to keep life insurance in force when his or her peers are spending money on cool cars, clothes, and fun throughout their 20s. If you are that rare person, you will not regret your decision when you and your peers are 30, 40, 50 or for the rest of your life.
You probably don't have dependents if you are asking this question however if your like most people Im sure you plan to one day at which point life insurance becomes necessary.
1. Life insurance premiums are based off your age and health, they will be cheaper now then ever again in your life
Life insurance term insurance
2. Life insurance builds cash value, this is emergency money you will be able to access if you need to, it earns an interest rate so the sooner you start the sooner you can take advantage of compound interest
3. Even if you have no dependents, should you pass away now it is still a financial burden on your family. Funerals and final expenses are not cheap, easily costing your family $15,000-$25,000 which could be covered by a life policy.
4. Kids are expensive! As mentioned at the start, when you start a family is when most people first think about life insurance, you will be happy you made a wise decision by locking in a lower rate when you start buying diapers