Why Life Insurance Is an Essential Part of Your Financial Well‑Being

January marks Financial Wellness Month—a natural moment to step back and evaluate how well your financial plans support your long-term goals. While many people focus on saving, budgeting, or investing, one key element often gets pushed aside: life insurance. Though it’s commonly associated with later stages of life, life insurance actually plays a vital role in your financial stability today and in the years ahead.

Life insurance provides security for the people you care about, prepares your household for unexpected events, and in some cases, even helps support your personal financial goals while you’re still living. Below, we’ll break down what life insurance really accomplishes, explore the different types of coverage, and share tips for keeping your policy aligned with your evolving life.

What Life Insurance Actually Does

Simply put, life insurance offers financial protection to the people you designate as beneficiaries. If you pass away, they receive a payout—known as a death benefit—that can help cover major expenses such as mortgage or rent payments, credit card balances, funeral costs, child care, or everyday household needs.

In many ways, life insurance keeps your family’s financial plan intact during one of life’s hardest moments. The payout provides accessible cash at a time when it’s most needed, turning an overwhelming “what if” into something that can be managed more predictably.

To keep your policy in force, you pay regular premiums. In exchange, your insurer guarantees a death benefit under the terms of your plan. That level of protection and peace of mind is why life insurance is often considered a foundational part of a strong financial strategy.

Understanding Term vs. Permanent Life Insurance

There are two primary categories of life insurance: term and permanent. Each serves different purposes, and the best fit depends on your life circumstances, budget, and long-term plans.

Term life insurance provides coverage for a specific period—commonly 10, 20, or 30 years. If you pass away within that timeframe, your beneficiaries receive the death benefit. If the term ends while you’re still living, the policy expires. Term life is typically the most affordable option and works well for covering higher-responsibility years, such as when you’re raising children, paying off large debts, or relying heavily on earned income.

Permanent life insurance lasts for your entire lifetime as long as premiums are paid. These policies also include a cash value component that gradually grows over time. This savings-like feature can be borrowed against or withdrawn, though doing so may decrease the final death benefit.

Within permanent life insurance, there are two common types:

• Whole life insurance provides fixed premiums, guaranteed cash value growth, and a set death benefit. It’s steady and predictable, which appeals to people who want long-term stability.
• Universal life insurance offers more flexibility. You can change your premium payments and adjust your death benefit, and the cash value growth is tied to market performance. This gives you more control but also comes with increased risk depending on market behavior.

Both options can serve important roles in long-term financial planning, especially for those who want lifelong coverage or appreciate the added benefit of a built-in savings mechanism.

Is Cash Value a Good Fit for You?

The cash value feature in permanent life insurance often gets talked about as a major perk. Over time, it can be used to cover big expenses such as education costs, medical bills, or part of your retirement income plan.

However, it’s important to understand how cash value grows—it typically accumulates slowly in the early years. Withdrawals or policy loans can also reduce the eventual payout your loved ones receive. Additionally, permanent life insurance tends to cost more than term coverage.

If you know you need lifelong protection or appreciate the consistency of fixed premiums, cash value may be a meaningful advantage. But for many people, it’s wise to ensure that retirement accounts and other savings vehicles are well funded before relying heavily on a life insurance policy for investment purposes.

Optional Riders That Expand Your Coverage

Life insurance can be customized, and that’s where riders come into play. Riders are add-ons that tailor your policy to better match your specific needs and circumstances.

Common examples include:

• Long-term care riders that help pay for ongoing care if you can’t perform certain daily activities due to illness or injury.
• Terminal illness riders that allow you to access part of your death benefit early if you’re diagnosed with a terminal condition.
• Return-of-premium riders on term policies, which refund your premiums if you outlive your policy’s term.

Many term policies also include a conversion option that allows you to switch to permanent coverage later—often without needing a new medical exam. This can be especially valuable if your health changes and qualifying for a new policy becomes more difficult.

Riders help make a policy more adaptable and better suited to your long-range financial and personal needs.

How to Keep Your Life Insurance Up to Date

Part of staying financially healthy is making sure your life insurance still reflects your current life. Here are a few simple ways to keep things on track:

• Review your beneficiaries annually. Life changes quickly, and events like marriage, divorce, or welcoming a child can impact who you want listed on your policy.
• Check your coverage amount. If your income, expenses, or family size shift, you may need to increase or decrease your benefit.
• Look into conversion options. If you have a term policy, find out whether you can convert it to permanent insurance. This can be useful if your needs evolve or your health declines.
• Schedule a yearly policy review. Just like revisiting your budget or retirement contributions, a quick once-a-year check keeps your coverage aligned with your goals.

If you’d like help reviewing an existing policy or exploring new options, we’re here to support you. Our goal is to help you protect the people and priorities that mean the most.