Is Life Insurance Worth It?

If you’ve been told to look into life insurance, there’s a question you’ll probably have when you’re going through the research and buying process: Is life insurance actually worth it?

If you have anyone financially dependent on you and you don’t have enough money set aside to provide for them financially if you were to die tomorrow, then life insurance is absolutely worth it. It should be your top insurance priority. (We’re not just saying that.)

If you’ve been told to look into life insurance, there’s a question you’ll probably have when you’re going through the research and buying process: Is life insurance actually worth it?

Why is life insurance so necessary?

Most people would agree that without a financial cushion from life insurance, their family might face a dire money situation if they were to pass away. That’s why term life insurance is so valuable. For a lot of people, it’s the difference between their family living out their lives without any financial stress and their family potentially really needing to scale back their lifestyle (moving out of their house, cutting back significantly on expenses, etc.). As a result, it’s an affordable way to protect the people you love most financially.

What are the benefits of life insurance?

Life insurance provides a lump sum of cash that can be used for pretty much anything:

  1. Day-to-day expenses for your spouse
  2. Mortgage payments
  3. Outstanding debt payments
  4. Your children’s education expenses

This lump sum will be tax-free if you buy the life insurance policy on your own and pay the premiums with after-tax dollars.

What about life insurance through work?

Many people assume that if they have life insurance through work, they’re set. Having life insurance coverage through work is indeed a great perk. But if you have kids or significant debt, like a mortgage, then you’re probably underinsured.

Typically, work-life insurance policies cover only, at most, 2x to 3x your income. For most people, this doesn’t even cover their mortgage. Another important consideration is that coverage through work usually ends when you leave your job, which could leave your family without a policy. Your best option is to hold an individual life insurance policy to ensure you have enough coverage and to lock in an affordable rate while you’re young and healthy.

How much does it cost?

Term life insurance is the simplest and most affordable form of life insurance. It pays out only if you die within a specified timeframe, usually 10, 20, or 30 years. As you can guess, the probability of you filing a claim (because you die before you turn 65, for example) isn’t that high. As a result, the prices for term life insurance also aren’t that high.

$250,000 of coverage for 20 years$500,000 of coverage for 20 years$750,000 of coverage for 20 years
Male, aged 30$18/month$30/month$46/month
Female, aged 30$15/month$23/month$34/month
Male, aged 40$28/month$49/month$72/month
Female, aged 40$22/month$35/month$53/month
Male, aged 50$72/month$130/month$195/month
Female, aged 50$51/month$85/month$129/month

For instance, a 20-year, $500,000 term life insurance policy costs around only $35/month for someone in their 30s. For a lot of people, this can be enough coverage to keep their families protected.

When is the best time to get life insurance?

The best time to get life insurance is when someone depends on you. For most people, this is when they get married or start having kids.

We know what you’re thinking: “But I just got a mortgage, and having kids isn’t cheap! How am I supposed to afford life insurance?"

Fortunately, the younger you are, the more affordable your life insurance will probably be. In most cases, it’s smart to lock in a low monthly rate when you’re young because it’ll stay at that price for the entire term of your policy.