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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By

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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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, 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. And for many people, the price is worth the peace of mind that their family would be taken care of.

Key takeaways

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

  • The financial consequences for your family if you were to die without a policy in place would be significant. 

  • 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

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 support 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 cosigned 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 $233,610, [1] and nursing home care can reach $105,850 per year. [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, costs on average, $27,330 for a public four-year school in state and $55,800 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 $25.60 a month for a 20-year policy with a $500,000 death benefit, while a healthy 45-year-old female would pay $47.90. Over the lifetime of the policy, the total premiums — $6,142.40 and $11,496.00 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

Ready to shop for life insurance?

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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. Two common scenarios when you don’t need a life insurance policy: 

  • 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.)

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.

References

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Policygenius uses external sources, including government data, industry studies, and reputable news organizations to supplement proprietary marketplace data and internal expertise. Learn more about how we use and vet external sources as part of our

editorial standards.
  1. U.S. Department of Agriculture (USDA)

    . "

    "The Cost of Raising a Child." Accessed April 18, 2022.

    ." Accessed September 26, 2022.

  2. Genworth

    . "

    "Cost of Care Survey"

    ." Accessed September 26, 2022.

  3. Federal Reserve Bank of Richmond

    . "

    "End-of-Life Medical Expenses"

    ." Accessed September 26, 2022.

  4. CollegeBoard

    . "

    "Trends in College Pricing and Student Aid, 2021"

    ." Accessed September 26, 2022.

Author

Senior Editor & Licensed Life Insurance Expert

Nupur Gambhir

Senior Editor & Licensed Life Insurance Expert

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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.

Expert reviewer

Financial Advisor

Maria Filindras

Financial Advisor

gray linkedin icon link

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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