Is Life Insurance Worth It? Understanding Pros & Cons

Yes — if you have financial dependents or long-term obligations, life insurance can be a smart investment. It offers essential financial protection by covering expenses like debts, funeral costs, and lost income. However, if you’ve already met your major financial responsibilities and your loved ones are financially secure without you, a policy may not be necessary.

To decide if it’s right for you, weigh the cost of premiums against the benefits, and evaluate which type of policy — term or permanent — best aligns with your goals.

When you buy life insurance is a financial agreement between you and an insurance company. You pay premiums regularly; in return, the insurer provides a predetermined death benefit to your beneficiaries when you die. This benefit can help settle debts, replace lost income and provide financial protection for your loved ones.

Understanding how life insurance works can help you determine its value in your financial plan.

Multiple factors determine the cost of life insurance. Understanding these can help you choose a policy that fits your needs and budget.

In the table below, you can explore average term life insurance costs by age to help you plan for your potential policy. These rates are based on a $250,000 term life insurance policy for a healthy, nonsmoking adult.

Understanding the advantages and disadvantages of life insurance can help you make an informed decision and assess whether the benefits of life insurance align with your financial goals and personal circumstances.

Life insurance is for your loved ones, not just for you. Since everyone's situation is different, there’s no one-size-fits-all policy. However, if people depend on you financially, a solid life insurance policy can help ensure their financial security if you pass away.

Life insurance is a smart choice for individuals experiencing major life events or taking on long-term responsibilities. You should consider buying a policy if you’re getting married, starting a family, supporting loved ones financially, taking on debt like a mortgage, or planning for the future. In these situations, life insurance can provide financial protection for those who depend on you.

While having life insurance can be reassuring, it may not be worth the cost if you're in any of these situations:

While there's nothing wrong with purchasing a life insurance policy, even if you don’t strictly need it, you may get more value from putting those funds toward other priorities, like contributing to a retirement plan or building your emergency fund.

Life insurance comes in various types, but the two main categories are term and permanent. Each serves distinct needs and offers unique features and limitations.

Term life insurance is straightforward but offers no cash value, while permanent life insurance can provide a death benefit and be an investment tool.

Term life insurance is often a good choice for those with dependents who want to financially protect their loved ones for a set period. This insurance type tends to be more affordable than whole life insurance. However, you’ll need to purchase a new policy once your term length is up if you want to continue coverage.

Term life insurance is straightforward and affordable, making it an excellent option for most people. It provides coverage for the length of the policy, so you’ll be covered if you die at any time during the term. Once your term has ended, you can purchase a new policy.

Sometimes, insurers allow converting a term life insurance policy to a permanent policy if needed.

Permanent life insurance, which includes whole life and universal life insurance, provides coverage for your entire lifetime as long as you continue to pay premiums. Unlike term life, permanent life insurance policies often have a cash value component, which can be an additional savings vehicle.

While permanent life insurance offers lifelong coverage and a cash value component, it’s not ideal for everyone. Its main drawback is the higher cost compared to term life insurance. Evaluate your financial situation and long-term needs to ensure this policy aligns with your goals and justifies the higher premiums.

Life insurance isn't the only way to secure your family's future. Alternative strategies are worth exploring based on your needs and financial goals. Here are a few of them:

Each option has risks and benefits. Consult financial advisors to tailor a strategy that suits your circumstances.

Life insurance is worth it if someone depends on your income — whether a spouse, child, or aging parent. According to industry experts, the right policy ensures your loved ones can cover debts, daily expenses and long-term needs like education or housing in your absence. 

For young, healthy individuals, term life offers affordable peace of mind. However, if you’re financially independent with no dependents, life insurance may not be necessary. Evaluate your personal situation and goals before deciding, and consult a financial advisor for tailored recommendations.

Deciding if life insurance is worth it involves many factors. To help you, we answered common questions about life insurance.

Why Trust MoneyGeek? We analyzed 1,488 life insurance quotes alongside customer satisfaction, financial stability reports, product offerings and more to determine the best  life insurance companies.

MoneyGeek created a scoring system to compare life insurance companies across five categories and ranked them based on their scores. We chose to review these companies based on their broad national coverage and ability to provide an online quote.

MoneyGeek’s Scoring System

In our unique scoring system, companies can earn up to five points in each of five categories. We then use these category scores to calculate an overall MoneyGeek score out of 100. We applied the following weightings to score insurers:

• Affordability: 30%
• Financial Stability: 25%
• Buying Process: 20%
• Customer Satisfaction: 15%
• Product Diversity: 10%

Each company’s score incorporates:

• Cost data obtained through online quotes
• Financial strength ratings from AM Best and number of years in business
• Customer satisfaction data from the National Association of Insurance Commissioners (NAIC) customer complaint index (we reviewed annual complaint data from 2020 to 2022, the most recent year available)
• Availability of tools to aid in the buying process, such as online product materials and multiple payment options
• Diversity of life insurance products offered

Sample Customer Profile

MoneyGeek used a standard profile to obtain life insurance quotes:

• 40-year-old male
• Non-smoker
• 5 feet 11 inches tall and 175 pounds
• Excellent health rating

Premiums are based on the standard profile unless otherwise noted.

We modified the profile by age, gender, height, weight, tobacco use, health rating and geographic location to collect a variety of quotes and determine the best life insurance company for several types of customers. We collected quotes for term life insurance with varying term lengths and coverage amounts as well.

We identified trends in the data set and used those patterns to calculate projections and extend the data beyond what was originally collected.