Is life insurance worth it?

Life insurance, especially affordable term life insurance, is worth it for the benefit of financial protection for your family.

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Nupur Gambhir

Nupur Gambhir

Senior Editor & Licensed Life Insurance Expert

Nupur Gambhir is a licensed life, health, and disability insurance expert and a former senior editor at Policygenius. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service Cake.

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This article has been reviewed by a licensed Policygenius expert to ensure that sources, statistics, and claims meet our standard for accurate and unbiased advice.

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Maria Filindras

Maria Filindras

Financial Advisor

Maria Filindras is a financial advisor, a licensed Life & Health insurance agent in California, and a member of the Financial Review Council at Policygenius.

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A life insurance policy is important for any family's financial plan. A policy won’t supplement your retirement, but it's worth buying because it will give your family a large sum of tax-free money if you die unexpectedly.

Over the course of a policy, life insurance costs exponentially less than the amount your family would receive if you died. If anyone depends on you for financial support, talk to a Policygenius agent to get the best coverage for your background.

Key Takeaways

  • Life insurance costs are very little compared to the potential payout.

  • For anyone with financial obligations, the safety net of a life insurance policy is worth the cost.

  • Healthy people in their 30s could pay as little as $25 a month for a $500,000 policy lasting 20 years.

Who needs life insurance?

If you have financial obligations that would fall on others if you died, you need life insurance coverage. With Americans owing $90,460 of debt on average, [1] any inherited debt would add to the crippling financial strain many people already experience. 

Incorporating a life insurance policy into your financial plan is the best way to ensure your loved ones don’t financially suffer — or become responsible for your debt — when you die.

→ Learn how to calculate how much life insurance you need

Why should you get life insurance?

It's worth buying coverage to protect your family because the benefits of buying life insurance outweigh the costs. Often, you’ll spend far less for coverage than your family would receive when you die. Here’s what typical expenses look like for the average American family:

  • Mortgage: $337,560 [2]

  • Debt: $90,460

  • College tuition for a public four-year in-state university: $42,960 [3]

  • Everyday bills and expenses - $61,334 [4]

  • Medical debt - $2,000 [5]

  • End of life expenses - $7,000 to $10,00 [6]

That’s $544,314 in expenses that your family would be liable for. Meanwhile, a healthy female in her 30s can expect to pay an average of $25.60 a month for a 20-year policy with a $500,000 death benefit, while a healthy female in her 40s would pay $48.09. That’s a fraction of the cost — $6,142.40 and $11,541.60 over 20 years, respectively. 

When you get life insurance, the amount of money your beneficiaries receive after filing a claim far exceeds the amount you spend on coverage, even if you customize your policy with added riders. In this scenario, it’s more than 47 times the amount you pay for your policy. For those with financial obligations, the premiums you pay produce far greater dividends.

→ Learn more about the benefits of having life insurance protection

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When life insurance isn’t worth it 

We’re advocates for a financial plan that includes life insurance coverage — but sometimes, you just don’t need it. If you have enough liquid cash to cover your debts and end-of-life expenses, you probably don’t need a policy. Or, if you don't plan to get married or have a family, getting coverage might not be the most worthwhile use of your budget.  

Thinking of using life insurance as a way to get a loan or make some cash off of your own policy? We wouldn't recommend that either.

Speak with a certified financial planner about whether or not you need coverage is the best way to ensure that foregoing a policy won’t have any financial ramifications. 

Frequently asked questions

Do you need life insurance?

If you have any financial responsibilities that impact other people, the benefits of life insurance are worth the cost. The life insurance payout far exceeds the amount spent on life insurance premiums.

What's the benefit of having life insurance?

Life insurance pays a tax-free lump sum to your family when you die so that they don't struggle financially or have to pay off your debts alone.

What are the disadvantages of life insurance?

If you don't have any debts or dependents, life insurance may not be worth the money for you.