I’ve said it before, life insurance is an emotional decision, for you and the ones you’re leaving behind.

But let’s take a look at some cold, hard numbers for just a couple of minutes.

Let’s look at life insurance and the timing as an investment. How much does it cost versus how much does your family get when you die? Are you better off waiting to buy life insurance?

The above chart shows the rate of return on term life insurance policies for a man at three different points in his life.

(These estimates are all with Farmers New World Life, but it’s going to be a similar picture for whatever company you decide to go with).

The blue line is the rate of return for the man buying a $150,000, 30-year term policy when he’s 45 years old. So if he buys it and dies the next day, he would have spent about $100 (a single premium payment) and his family will receive $150,000 for return on investment of $149,900.

If he dies at the age of 75, he will have spent about $33,000 on life insurance and his family will receive $150,000 for a return on investment of $116,000 — a pretty nice chunk of change and a lot better ROI than anything you’ll get in the stock market.

The red line shows what would happen if the same man waited until he was 55 before he bought a $150,000 policy. Since he’s 10 years older, he can’t get a 30-year term anymore, so he buys a 20-year term that will take him to age 75.

At first glance, the return looks better, especially at first. If he dies at 56 he’ll have only spent $1,600 for the $150,000 payoff. Meanwhile the 45-year-old sucker has paid an extra $10,000 for those 10 years of coverage.

But there are some rather large caveats here: 1) It assumes he didn’t die in a car accident at age 50, in which case his family would have absolutely bubkis. 2) It also assumes he didn’t develop cancer. Or diabetes. Or high blood pressure. Or asthma. Or any number of other ailments that would make it more expensive or impossible to buy life insurance at age 55.

In addition, the better rate of return flattens out rather quickly. At age 55, the difference is $10,000. At age 75, the difference is barely $1,000.

The 65-year-old version of our example is in orange. If he dies at 66, he’s saved $16,000 over the 55-year-old version and a whopping $21,000 over the 45-year-old version.

But now he’s had an extra 20 years to die in a fiery collision or develop medical issues. He could save that $21,000, or he could spend it to make sure his family is taken care of.

Again, the better return drops to about $11,000 when he reaches age 75.

That’s a whole lot of risk to save $11,000 on a $150,000 payoff.

Please don’t think this is an excuse to not buy life insurance because you’re “too old.” In fact, the whole reason I got to thinking about it is because I have a 69-year-old client who wanted to make sure his wife was taken care of after he died.

I’ve just heard the “I’m too young for life insurance” or, “It’s OK if I wait for life insurance,” excuses a lot.

I have some more charts that talk about whole life later. Questions? Shoot me an email at dgragg@farmersagent.com