Is Life Insurance Worth It? How To Decide Whether To Get Life Insurance

Whether or not life insurance is worth it depends on your circumstances. Life insurance is often a good idea if you’re married or have children or other dependents.

Last Updated: 4/4/2022
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Life insurance can be a great way to provide for your loved ones if you die unexpectedly, but it isn’t something everyone needs. If you’re married, have a long-term significant other or have children or other dependents who rely on your income, life insurance could help protect them.

If you’re young and healthy, have a low income but not a lot of debt, or don’t have a spouse or dependents, it may not be the best financial decision for you.

Life insurance is nice to have, but it may or may not make the most financial sense for you. Different types of life insurance, such as term life insurance or whole life insurance, may also be a better fit depending on your circumstances.

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Key Takeaways

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Life insurance provides financial protection for your loved ones.

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Policy options include term life insurance, whole life insurance, and universal life insurance.

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You may not need life insurance, depending on your specific situation.

Benefits of Life Insurance

Life insurance plays a vital role in helping to ensure that your loved ones can make ends meet in the event of your passing.

In effect, life insurance can partially replace the income you would have earned for your household. Life insurance can cover everything from funeral costs to mortgage payments and other bills and expenses. Some of the other benefits of life insurance are outlined below.

1

It can help cover end-of-life expenses.

Regardless of the type of insurance you choose, most life insurance policies help cover end-of-life expenses, including funeral costs and medical bills.

2

It can help your loved ones financially.

Life insurance can help provide for your beneficiary or beneficiaries, which could be your spouse, children or other members of your family.

3

It provides peace of mind.

One of the main benefits of life insurance is providing you with peace of mind. If anything happens to you, you can rest assured that your policy will help provide for your loved ones.

4

Many plans have tax and other financial benefits.

Some types of life insurance, such as whole life insurance, also come with tax advantages and estate planning benefits. You can use them as a vehicle for saving. You can even borrow against them during your lifetime.

Compare Life Insurance Rates

Ensure you’re getting the best rate for your life insurance. Compare quotes from top providers to find the most affordable life insurance coverage for your needs.

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Reasons Why You Would Want to Buy Life Insurance

There are a variety of reasons and life events that might prompt you to purchase life insurance.

These include when you get married or are in a long-term partnership, when you have children, and when you take on financial responsibilities and debts, like a mortgage.

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    You’re getting married.

    When embarking on married life with your new spouse, it’s a good idea to plan for the future to ensure that you’re both protected. If your spouse relies on you financially, a life insurance policy can help make sure that your spouse is provided for in the event of your passing.

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    You have kids.

    We also recommend purchasing life insurance when you become a parent or assume responsibility for a dependent. Life insurance will help take care of your children if you die while they’re still young.

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    You bought a house.

    If you have a significant financial obligation like a mortgage, you might want to consider purchasing life insurance. A life insurance policy can help your family afford monthly mortgage payments and other big bills.

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    You support other loved ones financially.

    Life insurance is a good idea if you’re the primary breadwinner for your household or support family members like parents or siblings. In the event of your passing, a life insurance policy can help mitigate the loss of your income.

Life insurance may not be an option you need if you’re single, childless, and in your early twenties, but it’s worth considering as you accumulate commitments and responsibilities throughout your young adulthood.

In particular, you should think about getting life insurance when you go through significant life changes, like when you get married or have children. With more people dependent on your income, there’s more at risk if you’re no longer able to provide for your family.

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Having life insurance coverage is never a bad thing, but whether you need coverage and, if so, how much coverage you need ultimately comes down to your situation. You’ll want to consider whether the costs outweigh the rewards when deciding whether or not to purchase a policy.

Reasons Why You May Not Want to Buy Life Insurance

While having life insurance can be reassuring, it may not be worth the cost for some people. Life insurance may not make sense for you if you don’t have any dependents or have a low income.

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    You have no spouse or dependents.

    You might want to forgo life insurance if you don’t have a spouse or children. Life insurance is primarily a benefit for others, not yourself, so if there’s no clear beneficiary of the plan, it may not be worth the cost.

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    You have a low income.

    If you have a low income and are on a tight budget, life insurance may not be the best use of your funds.

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    You don’t financially support other family members.

    Another reason to purchase life insurance is to support other family members, such as parents or siblings, if you die. If you’re only financially responsible for yourself, you may not need to take out a life insurance policy.

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    You’re elderly and on a budget.

    The older you are, the more expensive your life insurance policy is. If you’re a senior considering a life insurance policy, you should carefully weigh whether or not the benefits of a policy are worth the cost.

Life insurance probably isn't worth the cost for young, healthy individuals with no dependents and low incomes. While there’s nothing wrong with purchasing a life insurance policy, even if you don’t strictly need it, you may be able to put those funds to better use elsewhere, like making contributions to a retirement plan or bulking up your emergency fund.

Similarly, life insurance might not make sense if you’re aging. Because life insurance is much more expensive for older individuals, the coverage might not be worth the cost.

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Rather than thinking of life insurance as an investment, it’s a good idea to think of it as protection for your loved one. While it’s true that some types of life insurance policies provide a return over time, this return is generally more modest than other investment vehicles, such as retirement accounts.

Compare Life Insurance Rates

Ensure you’re getting the best rate for your life insurance. Compare quotes from top providers to find the most affordable life insurance coverage for your needs.

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Term vs. Whole Life Insurance

If you decide to sign up for a life insurance policy, you’ll have to choose between two major types of life insurance: term life insurance and whole life insurance. Depending on your needs, one type of coverage may be a better fit than the other.

Term life insurance covers you for a specific length of time, generally between 10 and 30 years. After that term expires, you’ll have to purchase a new policy to continue coverage. Term life insurance premiums are usually more affordable than whole life insurance premiums. This type of insurance is a good fit for most customers looking for a policy that will provide for their loved ones.

Whole life insurance covers you for your entire life as long as you continue to pay your monthly premiums. This type of policy tends to be more expensive than term life insurance. However, it can help provide peace of mind if you have dependents.

Whole life also comes with tax benefits and other financial perks, especially if you’ve already maxed out your retirement contributions and are looking for additional savings vehicles.

Life whole life insurance, universal life insurance is a form of permanent life insurance. While whole life insurance premiums are fixed, universal life insurance has flexible premiums and coverage amounts throughout the policy's life. Unlike whole life insurance, returns from invested universal life insurance policies may not be guaranteed.

Everyone’s financial circumstances are different, which is why it’s impossible to recommend a one-size-fits-all approach to life insurance. While whole life insurance can mean paying hundreds more than term life for coverage every month, it may make sense in some cases, particularly for high earners.

When deciding which type of life insurance is right for you, you should consider your budget, dependents and other family members who rely on your income. You’ll also want to consider your health, age and other factors.

Cost of Whole vs. Term Life Insurance for a 30-Year-Old Male ($500,000 Coverage)

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Term Life Insurance

Monthly Cost

$26
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Whole Life Insurance

Monthly Cost

$511
Whole life insurance premiums are on average:$485 more

This is 1865% more expensive.

Is Term Life Insurance Worth It?

Term life insurance is often a good choice for individuals with dependents who want protection for their loved ones. This type of insurance 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

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Best for:
  • Someone who wants to ensure their family’s financial safety but has a budget
  • Someone who wants to set the term length of their coverage
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Not for:
  • Someone who wants to use a life insurance policy for investing or estate planning
  • Someone with a high income who wants guaranteed lifetime coverage

Term life insurance may not sound quite as attractive as whole life insurance up-front, but there are many advantages to this type of policy. First and foremost, term life insurance is significantly more affordable, putting it within reach of many more individuals.

Term life insurance provides coverage for the length of the policy, so you’ll be covered if you die any time during the term. Once your term has ended, you can purchase a new policy.

In some cases, insurers will allow you to convert your term life insurance policy to a whole life insurance policy if needed.

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Term life insurance is straightforward and affordable, making it an excellent option for most people.

Is Whole Life Insurance Worth It?

While whole life insurance doesn’t make sense for most people, it may be worth it in some cases. This type of policy comes with significantly higher monthly premiums, but it does provide guaranteed peace of mind in the event of your death.

Whole life insurance may be a good choice if you’ve maxed out your retirement savings and plan to use a life insurance policy to take advantage of tax benefits and continue to grow your wealth.

While technically classified as whole life insurance policies, policies like final expense life insurance are another option worth considering if you’re interested in guaranteed lifetime coverage.

These policies generally have a much more modest payout of between $5,000 and $50,000, which your dependents could use to cover final expenses like burial. Because of the low coverage amount, the monthly premium for these policies is generally lower.

Whole Life Insurance

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Best for:
  • A high earner who has maxed out their retirement contributions
  • Someone who wants to grow their wealth with a life insurance policy
  • Someone who wants guaranteed coverage and for whom cost is not an issue
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Not for:
  • People on a budget
  • Individuals who do not plan to use their policy as a tool for investing or estate planning

Whole life insurance probably isn’t the best fit for most people. But it can be a good choice in some cases—it all depends on your personal and financial situation.

It’s essential to keep in mind that whole insurance is more expensive than other types of life insurance, so you’ll want to make sure you can afford the high monthly premiums before you purchase a whole life policy.

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Many insurance agents and financial advisors make money by selling insurance products to their customers.

Financial professionals are often highly motivated to sell permanent life insurance, including whole and universal life insurance because they’ll receive a hefty commission. Don’t be pressured to buy insurance that you don’t need — choose the policy that makes the most sense for you.

Should You Buy Life Insurance?

Whether you should buy life insurance ultimately depends on your specific situation. When deciding whether or not to take out a policy, you should take a moment to assess your needs and the needs of your loved ones.

Questions to Ask Yourself Before Buying Life Insurance

Considering purchasing life insurance coverage? Here are some questions you may want to ask yourself before deciding.

1

Do you have dependents?

One of the primary purposes of life insurance is to provide for children and other dependents in the event of your passing.

2

Are you married or in a long-term partnership?

Your spouse or significant other is another person you should consider when deciding whether to buy life insurance. If they depend on your income, insurance is probably a good idea.

3

Do you financially provide for other loved ones?

You should consider purchasing life insurance if you provide for other family members, like siblings or parents.

4

Do you have a high income?

The higher your income, the more sense it makes to purchase significant life insurance coverage.

Life insurance isn’t something you necessarily buy for yourself; it’s something that you purchase for your loved ones. Because everyone’s circumstances are different, there’s no one-size-fits-all approach to selecting a life insurance policy.

That said, if you have people in your life who depend on you financially, a robust life insurance policy can help to ensure that they’re taken care of if you die.

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Not everyone needs life insurance. Depending on your particular situation, it may or may not be worth it, so it’s a good idea to evaluate your circumstances carefully before purchasing a policy.

Compare Life Insurance Rates

Ensure you’re getting the best rate for your life insurance. Compare quotes from top providers to find the most affordable life insurance coverage for your needs.

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Insurance Rates

Frequently Asked Questions

With several types of policy options to choose from, navigating the process of purchasing a life insurance policy can sometimes be a little confusing. We’ll cover common questions about life insurance coverage and policies.

About the Author


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Margaret Wack is a freelance writer who covers insurance, saving, investing, banking, and more. Margaret earned a bachelor's degree in classics, comparative literature, and poetry from Smith College and a master's degree from St. John's College.