Q

Is life insurance worth it?

A

For anyone with financial obligations, the benefits of life insurance coverage far outweigh the costs.

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While you’re building your nest egg, there are key components to your financial plan that you shouldn’t overlook. Namely, life insurance. A life insurance policy won’t supplement your retirement, but it will provide your family a large sum of tax-free money if you die unexpectedly. And for most people, that financial protection is well worth the cost.

Over the course of a policy, life insurance costs exponentially less than the amount your loved ones 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 high death benefit 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 $24.67 a month for a $500,000 death benefit.

Who needs life insurance?

The average American already faces obstacles when it comes to their finances. Owing $92,727 of debt on average, any additional financial strain only adds to the crippling financial strain many Americans already experience. 

Therefore, 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 fall into debt — if you unexpectedly die.

→ Learn how to calculate how much life insurance you need

Why should you get life insurance?

If the benefits of buying life insurance outweigh the costs, it’s worth buying coverage to protect your family. Often, you’ll spend far less for coverage than your family would receive if you died unexpectedly. Here’s what typical expenses look like for the average American family:

  • Mortgage - $293,349 [1]

  • Debt - $92,727 [2]

  • College tuition for a public four-year in-state university  - $42,240 [3]

  • Everyday bills and expenses - $63,036 [4]

  • Medical debt - $2,000 [5]

  • End of life expenses - $8,000 to $10,00 [6]

That’s $503,352 in expenses that your family would be liable for. Meanwhile, a healthy adult in their 30s can expect to pay an average of $24.67 a month for a 20-year policy with a $500,000 death benefit, while a healthy adult in their 40s would pay $35.72. That’s a fraction of the cost — $5,920.80 and $8,572.80 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 58 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 estate taxes, 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.

If your death won’t financially impact anyone — and you have no plans to share expenses with a partner or have children in the future — you may not need to spend the money on a life insurance policy. Speaking 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. 

→ Want to learn more? Check out our glossary for life insurance basics

Frequently asked questions

Is it worth it to get a life insurance policy?

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

Is term life insurance worth it?

Term life insurance is relatively affordable and well worth the benefits for most people. For a generally low cost, it pays out a high death benefit amount.

Is whole life insurance worth it?

Because whole life insurance is very expensive, it isn’t worth it for most people. However, some individuals with specific needs may need to purchase a whole life insurance policy.