If anyone depends on you for financial support, you should own a life insurance policy for their protection. While the odds of you dying and your dependents actually needing the policy are low, especially if you’re young and in good health, they aren’t zero.
Over the course of a policy, life insurance costs much less than the amount your family would receive if you died.
For many people, the price is worth the peace of mind that their family would be taken care of. And yet, a recent Policygenius survey found that 49% of the sandwich generation (people with a parent age 65 or older who also are raising children or supporting adult children) doesn’t have a life insurance plan to help financially support their loved ones after they die.
Learning more about the life insurance options available on the market, what they cover, and how much they cost can also help you decide whether life insurance is worth it for you.
Types of life insurance
While there are many different types of life insurance, when you shop for a policy you usually have to choose between two main types: term life and whole life insurance.
Term life insurance
Term life insurance is one of the most affordable life insurance coverage options on the market, only lasts for a set term, and comes with few rules and tax restrictions.
Term life is the best option for most people looking to protect their income and provide their family with a financial protection to cover any debts — including a mortgage or any other types of personal loans.
Whole life insurance
Whole life and other types of permanent life insurance are good options for people looking to use life insurance to diversify their investment portfolio or those with long-term financial obligations or coverage needs, like dependents who require lifelong care.
Whole life insurance never expires and comes with a cash value component that earns interest in tax-deferred savings account in addition to the death benefit payout. Because of that, it’s usually five to 15 times more expensive than traditional term life policies.
If you’re already maximizing your contributions to tax-advantaged accounts like a Roth IRA or a 401(k) and are seeking another investment option, whole life might work for you.
→ Learn more about the differences between term life and whole life insurance
Final expense insurance
If you don’t have dependents or financial obligations left to cover and are simply looking for an option to cover final expenses, you can consider burial insurance, also known as final expense insurance.
Burial insurance is a type of permanent coverage designed to cover your funeral and burial costs. It usually offers low coverage amounts, up to $50,000, and you don’t need to take the medical exam that’s a standard part of the underwriting process for approval.
Comparing term vs. whole vs final expense insurance at a glance
Life insurance type | Coverage length | Best for ages | Medical exam required | Builds cash value | Death benefit payout | Premiums |
|---|---|---|---|---|---|---|
Term | 10 years to 40 years | 18-65 | Not always | No | $100,000+ | Fixed |
Whole | Life | 18-65 | Yes | Yes | $50,000+ | Fixed |
Final expense | Life | 45-85 | No | Yes | Up to $50,000 | Fixed |
How much is life insurance?
Your age, gender, health, lifestyle habits and the type of policy you buy will determine how much you’ll pay for life insurance. But if you apply while young and with few health conditions, life insurance is much more affordable than you might think.
For example, a non-smoking 35-year-old will pay $28 per month for a 20-year term life policy with a $500,000 death benefit payout — or $540 per month for a whole life policy with the same face value — remember that whole life is about five to 15 times more expensive than term life.
Below you’ll find a few additional term and whole life insurance rates.
These sample rates are for non-smokers who fall into the Preferred health classification — usually reserved for people with one or two minor health conditions or within the insurance company’s preferred range for height-to-weight ratio — seeking a life insurance policy with a duration of 20 years, 30 years, or whole life.
Age | Gender | $500,000 20-year term life insurance policy | $500,000 30-year term life insurance policy | $500,000 whole life insurance policy |
25 | Female | $21.01 | $31.02 | $351.00 |
Male | $27.13 | $39.57 | $403.00 | |
35 | Female | $25.76 | $39.35 | $489.50 |
Male | $30.79 | $46.78 | $591.50 | |
45 | Female | $48.43 | $80.86 | $744.50 |
Male | $61.49 | $105.62 | $1,361.50 | |
55 | Female | $111.35 | $216.56 | $1,219.50 |
Male | $153.76 | $311.77 | $1,462.50 |
Methodology: Average monthly term life insurance rates are for male and female non-smokers with a Preferred health classification buying a 20-year or 30-year $500,000 term life insurance policy. Term life insurance averages are based on a composite of policies offered through Policygenius from Brighthouse Financial, Corebridge Financial, Foresters Financial, Legal & General America, Lincoln Financial, Mutual of Omaha, Pacific Life, Protective, Prudential, Symetra, and Transamerica. Life insurance rates may vary by insurer, term, coverage amount, health class, and state. Average monthly whole life insurance rates are calculated for non-smokers in averaged Preferred Plus and Standard health classifications, obtaining a whole life insurance policy payable within 99 years from MassMutual. Individual rates will vary as specific circumstances will affect each customer's rate. Not all policies are available in all states. Rate illustration valid as of 01/01/2024.
If you want to learn more about life insurance quotes and the right type of coverage for your personal situation, connect with a Policygenius agent. At Policygenius, our experts are licensed in all 50 states and can walk you through the entire life insurance buying process while offering transparent, unbiased advice.
Who needs life insurance?
If you have financial obligations that would fall on others if you died, you need life insurance coverage.
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
Who does your life insurance policy protect?
Your policy proceeds can provide financial security for anyone whose finances will be impacted if you pass away and no longer provide an income. That includes your:
Spouse
Children
Aging parents
Other family members
Business partner
Even if someone doesn’t rely on you to fulfill their everyday needs, the loss of your income could affect them in other ways. Parents who co-signed private college loans would become responsible for the unpaid amount, for example.
→ Learn more about who needs life insurance and why
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.
There are no restrictions on spending the death benefit, so your beneficiaries can use the payout for short- or long-term obligations. Common uses include:
Child or dependent care: The estimated cost of raising a child through age 17 is nearly $296,515 in 2023 (adjusted for inflation), [1] and nursing home care can reach $134,352 per year (adjusted for inflation in 2023. [2]
Everyday expenses: Including bills, food, house cleaning, and other everyday needs.
End-of-life medical costs: Out-of-pocket expenses can be up to $9,000 in the final year of life. [3]
Funeral expenses: Burial or cremation services cost $7,000 on average.
Future education expenses: One year of college, including tuition, room and board, fees, transportation, etc., costs on average, $27,940 for a public four-year school in state and $57,570 for a private four-year school. [4]
Investing: Funds can go toward your partner’s retirement, an inheritance for your children, or a tax-advantaged education account, like a 529 plan.
Outstanding debts: Mortgages, business loans, or student loans are common debts that can be paid off with a life insurance benefit.
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.
For example, a healthy 35-year-old female can expect to pay an average of $25 a month for a 20-year policy with a $500,000 death benefit, while a healthy 45-year-old female would pay around $48 per month, according to Policygenius data.
Over the lifetime of the policy, the total premiums — $6,000 and $11,52 over 20 years, respectively — are a fraction of what your beneficiaries would get if you were to die while the policy is active.
→ Learn more about the benefits of having life insurance protection
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. Two common scenarios when you don’t need a life insurance policy include:
You don’t have any dependents, and don’t plan to. If you don’t plan to get married or have a family and no one depends on you for financial support, getting coverage might not be the most worthwhile use of your budget.
You can pay your own way. If you have enough liquid cash to cover your debts and end-of-life expenses, you probably don’t need a policy. (Though if you have a high net worth, you may still want to use life insurance to cover estate tax.)
Speaking with a certified financial planner about whether or not you need life insurance 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?
Life insurance can be an unnecessary expense depending on your personal situation. If you don’t have any debts or dependents, life insurance may not be worth the money for you.
