January marks Financial Wellness Month, making it an ideal moment to pause and evaluate how well your financial plans are supporting your current and future goals. One area many people forget to revisit is life insurance. Although it’s easy to assume it’s only important later in life, the truth is that life insurance can strengthen your financial foundation at every age.
Life insurance helps safeguard those who depend on you, prepares your household for the unexpected, and in certain cases can even serve your own financial needs while you’re still here. Below, we’ll break down the basics, explore the types of coverage available, and outline how to keep your policy aligned with your evolving life and priorities.
Understanding the purpose of life insurance
At its simplest, life insurance provides a payment—known as a death benefit—to the individuals you select as beneficiaries after you pass away. This financial support can help cover essential costs such as housing payments, outstanding debt, end‑of‑life expenses, childcare, or everyday household needs.
In many ways, life insurance functions as a safety net that keeps your family’s financial life stable during an extremely challenging time. It ensures access to funds when they’re needed most and offers reassurance that your loved ones won’t have to shoulder major financial burdens alone.
To maintain the policy, you pay premiums on a regular schedule. In exchange, the insurer promises to issue the death benefit according to the terms outlined in your contract. That reliability is what makes life insurance such an important component of a well‑rounded financial wellness plan.
Comparing term and permanent life insurance
Most policies fall into two broad categories: term or permanent. Each serves its own purpose, and the best fit depends on where you are in life, your financial goals, and your budget.
Term life insurance
provides protection for a specific period, commonly 10, 20, or 30 years. If you pass away during that window, your beneficiaries receive the benefit. If the term ends while you’re still living, the coverage simply expires. This option is usually the more budget‑friendly choice and is especially helpful for covering years where financial responsibilities are highest—such as raising children or paying down a mortgage.
Permanent life insurance
stays active for your entire lifetime as long as premiums are paid. These policies also include a built‑in savings component known as cash value. This amount grows over time and can be borrowed against or withdrawn, though doing so may reduce the death benefit.
The two most common types of permanent insurance include:
Whole life insurance: Offers consistent premiums, guaranteed cash value growth, and a guaranteed payout. It’s often chosen for its stability and predictability.
Universal life insurance: Provides more flexibility. You can adjust your premium amount and death benefit, and the cash value may grow based on market performance. This type offers more control but may also involve more risk.
Either permanent option can be a valuable long‑term tool, particularly if you want lifelong coverage or appreciate having a policy that builds additional financial value over time.
Is a cash value feature a good fit for your goals?
The cash value element in permanent life insurance can serve as an extra financial resource over the years. People sometimes use it to cover major expenses such as education costs, medical needs, or supplemental retirement income.
However, it’s important to understand how it works. Cash value grows gradually, especially in the early years. Loans and withdrawals may reduce the amount your beneficiaries receive later, and permanent policies typically cost significantly more than term coverage.
Cash value can be beneficial if you already know you need lifetime protection or prefer premiums that remain consistent. But for most households, it’s wise to prioritize funding retirement accounts and other savings goals before relying on life insurance as an investment strategy.
Customizing your policy with riders
Life insurance can be tailored to your needs with optional add‑ons known as riders. These enhancements allow you to adjust your coverage so it better reflects your personal situation.
For instance, a long‑term care rider can provide financial support if you develop a serious illness or injury and require extended care. A terminal illness rider allows you to access a portion of your death benefit early if you receive a qualifying diagnosis. Some people choose a return‑of‑premium rider for their term policy, which may refund the premiums if they outlive the term.
Certain term policies also include the option to convert to permanent coverage without a new medical exam. This can be especially valuable if your health changes and qualifying for a new policy becomes more difficult.
These added features can help your coverage stay flexible and supportive of your long‑term plans.
Keeping your life insurance current
Because life changes over time, it’s important to review your life insurance regularly. A few simple habits can help ensure your policy continues to meet your needs:
- Review your beneficiaries annually and update them after significant life events such as weddings, divorce, or the arrival of a new child.
- Confirm that your coverage amount still aligns with your current financial responsibilities, including income, debts, and family size.
- If you have term life insurance, check whether your policy includes a conversion option that allows you to shift to permanent coverage without new medical exams.
- Schedule a yearly policy review, much like you would with your budget or savings plan, to make sure everything remains on track.
If you’d like guidance reviewing your current policy or exploring new coverage options, reach out anytime. We’re here to help you protect what matters most.