Is Life Insurance Worth It?

Life insurance is worth it if someone would face financial hardship from your death. The simple test: would anyone struggle to pay bills, lose their home, or be unable to afford basic needs if you died tomorrow? If yes, you need coverage.

Yes, life insurance is worth it if:

• Someone relies on your income for housing, food or bills. Dependents can be children, a spouse, partner, or aging parents who need your financial support.
• You have debt that would burden others like a mortgage, car loans or credit cards. Co-signed loans transfer to the co-signer when you die.
• You want to fund future expenses like your children's college education or cover final expenses so your family doesn't pay out of pocket.
• You need estate planning benefits to cover estate taxes or leave a guaranteed inheritance to your heirs.

No, life insurance is not worth it if:

• You have no financial dependents. Nobody relies on your income for their daily living expenses or long-term financial security.
• You've accumulated enough wealth to support your family without insurance. Your savings and investments can replace your lost income.
• Your budget can't handle premiums and you have no dependents. Build an emergency fund first if you're single.
• You're elderly with no remaining obligations. Your kids are financially independent, your mortgage is paid off, and you have retirement savings.

The bottom line: Most working adults with families need life insurance. The average policy costs $30 to $50 monthly and provides $500,000 in protection. Single people without dependents can skip coverage.

LIMRA's Insurance Barometer Study tracks why Americans buy life insurance. Most people buy when they identify with one of these situations. Check which apply to you:

• Income replacement (68%): Your family loses your paycheck when you die. Insurance replaces that income.
• Debt protection (52%): Mortgages and co-signed loans don't disappear. Insurance pays them off.
• Final expenses (47%): Funerals cost $7,000 to $15,000. Insurance covers this immediate need.
• Education funding (41%): College savings plans require your future income. Insurance ensures the money is there.
• Estate planning (32% for inheritance, 18% for taxes): High net worth individuals use insurance for wealth transfer and tax payments.

If any of these situations apply to you, life insurance is worth the cost.

Life insurance coverage makes more sense at certain ages and stages of life than others Here's  the cost of a $500,000 policy and when you'll get the most value from life insurance by age:

Life insurance costs less than most people think, and the protection far exceeds what you pay. A healthy 30-year-old pays roughly $30 monthly for $500,000 in 20-year term coverage. Over 20 years, that's $7,200 in premiums. Your family gets $500,000 if you die. That's 69 times what you paid.

The immediate protection matters most. If you die in year one, your family gets $500,000 after paying just $360 in premiums. Self-funding can't provide that.

Even if you pay premiums for 30 years ($10,800 total) and never use the policy, your family had $500,000 in protection the entire time. Compare that to the financial impact of losing your income with no safety net. For context, $30 monthly is less than most streaming service bundles or a weekly coffee habit.

Your rate locks in when you buy. If you develop diabetes, heart disease or cancer later, your premium stays the same. Waiting to buy means risking higher rates or being uninsurable.

Life insurance comes in many types, but the two main categories are term and permanent. Term life insurance is straightforward and provides a death benefit, but provides no cash value. Permanent life insurance, like whole life, offers a death benefit and functions as an investment tool.

Most families should buy term coverage. It's affordable and covers the 20 to 30 years when your family faces the most financial risk. Put the savings from cheaper premiums toward retirement accounts or emergency funds. You'll build more wealth than permanent insurance provides.

Term policies last 10, 20 or 30 years and cost significantly less than permanent coverage. A healthy 35 year old pays $45 monthly for $500,000 in 20 year term coverage. 

Buy term if you: Have a mortgage, young kids, or temporary financial obligations that'll disappear in 20 to 30 years. Most families need term coverage.

Skip term and consider permanent if you: Need lifetime coverage for estate planning or have a permanently disabled dependent requiring care after you die.

Whole life and universal life policies never expire as long as you pay premiums. They cost 5 to 10 times more than term. Expect $400 to $600 monthly for $500,000 in coverage. These policies build cash value you can borrow against. Think of it as a savings or investment account attached to insurance, though returns are 2% to 4% annually which is lower than stock market returns.

Buy permanent if you: Have maxed out retirement accounts, need estate planning tools, or want to leave a guaranteed inheritance. You also need a high income to afford premiums.

Skip permanent and consider term life if you: Have a tight budget, haven't maxed out your 401(k), or just need coverage while raising kids. The high cost rarely justifies the benefits for most families.

Life insurance raises a lot of questions. Here are answers to the most common ones.