Is Life Insurance Worth It?

Whether or not life insurance is worth it depends on how many dependents you have, and if you have any debt. In some cases, life insurance is considered essential to protect your loved ones. If you don't have dependents or excessive debt, you could go without life insurance coverage. Learn about which type of life insurance you'd most likely benefit from.

Lindsey Crossmier, writer for RetireGuide
  • Written by
    Lindsey Crossmier

    Lindsey Crossmier

    Financial Writer

    Lindsey Crossmier is an accomplished writer with experience working for The Florida Review and Bookstar PR. As a financial writer, she covers Medicare, life insurance and dental insurance topics for RetireGuide. Research-based data drives her work.

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  • Edited By
    Lamia Chowdhury
    Lamia Chowdhury, editor for RetireGuide.com

    Lamia Chowdhury

    Financial Editor

    Lamia Chowdhury is a financial content editor for RetireGuide and has over three years of marketing experience in the finance industry. She has written copy for both digital and print pieces ranging from blogs, radio scripts and search ads to billboards, brochures, mailers and more.

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  • Financially Reviewed By
    Eric Estevez
    Eric Estevez, Independent Licensed Life Insurance Agent

    Eric Estevez

    Licensed Independent Insurance Broker

    Eric Estevez is a duly licensed independent insurance broker and a former financial institution auditor with more than a decade of professional experience. He has specialized in federal, state and local compliance for both large and small businesses.

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  • Published: September 30, 2022
  • Updated: November 3, 2022
  • 8 min read time
  • This page features 7 Cited Research Articles
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APA Crossmier, L. (2022, November 3). Is Life Insurance Worth It? RetireGuide.com. Retrieved December 7, 2022, from https://www.retireguide.com/life-insurance/buy/is-life-insurance-worth-it/

MLA Crossmier, Lindsey. "Is Life Insurance Worth It?" RetireGuide.com, 3 Nov 2022, https://www.retireguide.com/life-insurance/buy/is-life-insurance-worth-it/.

Chicago Crossmier, Lindsey. "Is Life Insurance Worth It?" RetireGuide.com. Last modified November 3, 2022. https://www.retireguide.com/life-insurance/buy/is-life-insurance-worth-it/.

Key Takeaways
  • Life insurance is worth it if you have dependents, debt or any additional financial responsibilities
  • The older you get, the more difficult it will be to get affordable life insurance coverage with enough coverage
  • Whether or not life insurance is worth it to you depends on if you choose a term or permanent life insurance policy

Should You Get Life Insurance?

If someone depends on you financially, you should consider buying life insurance. Life insurance is considered a key element to feel financially secure, according to the 2022 LIMRA Insurance Barometer Study. Life insurance offers a death benefit, which can fill financial coverage gaps if you were to pass away.

Common ways to use a life insurance death benefit are for burial expenses, mortgage costs, children’s college funding, outstanding debt and everyday expenses.

When You Should Consider Life Insurance
  • If you’re the primary wage earner in your home
  • If you have dependents
  • If you have debt
  • If you have remaining mortgage

If you have a family, and you don’t get life insurance, you could be risking their financial security. According to the same LIRMA study, roughly 44% of U.S. households would face financial hardship within six months if the primary wage earner passed away.

“For someone with a family that depends on their earnings in household management that would require payment if that person was gone, not having life insurance can be very detrimental to the family finances. I occasionally see GoFundMe campaigns for situations that could have been managed much better with a life insurance policy,” Wade Pfau, Co-Director of the American College Center for Retirement Income, told RetireGuide.

If you have no dependents, mortgage or debt, you could go without life insurance if you have some savings set aside for burial costs. According to Lincoln Heritage Funeral Advantage, the average funeral costs between $7,000 and $12,0000.

Life insurance may not be worth it if you’ve waited too long to purchase a policy, or if your health has deteriorated too far. Your age and overall health influence your premium costs for life insurance. The premium cost could be too high for your life insurance policy to be beneficial in the long run.

“For someone with a family that depends on their earnings or their work in household management that would require payment if that person was gone, not having life insurance can be very detrimental to the family finances. I occasionally see GoFundMe campaigns for situations that could have been managed much better with a life insurance policy.”
Wade Pfau, Ph.D.,Professor at the American College of Financial Services and Co-Director of the American College Center for Retirement Income

It’s also important to note that the type of life insurance policy you choose will determine if it is worth it or not. Term and permanent are the two main types of life insurance. They both have drawbacks and advantages that will make one better suited for your lifestyle and financial goals over another.

Is Term Life Insurance Worth It?

Term life insurance would be worth it to you if you only need coverage for a limited period. Term policies offer coverage for 10, 20 or 30 years. According to the Insurance Information Institute, term policies are more affordable than permanent policies.

The biggest drawback of term life insurance is that if you outlive your policy, there is no death benefit. However, some purchase term life insurance just to provide peace of mind for their children.

You could purchase a 20-year policy to only provide coverage until your kids grow up and can financially depend on themselves. If this is your intention with purchasing a life insurance policy — a term policy would be worth it for you.

Since term policies are more affordable, you can typically get a low premium cost, even if you’re an older adult.

For example, if you’re 60-years-old looking to get a 10-year term policy with $250,000 of coverage from Progressive, your premium would likely be around $56 a month.

When You Should Consider Term Life Insurance
  • You only need coverage for 10, 20 or 30 years
  • You want to pay a lower premium

If you want a guaranteed death benefit with lifelong coverage, term life insurance would not be a good fit for you.

Is Permanent Life Insurance Worth It?

If you need lifelong coverage, and can afford potentially costly premiums, permanent life insurance would likely be worth it for you.

Permanent life insurance policies build a tax-deferred cash value. With most permanent policies, you can borrow against this value.

There are two main types of permanent life insurance policies — whole and universal. There are different pros and cons to each type of permanent policy.

When You Should Consider Permanent Life Insurance
  • You need lifelong coverage
  • You want a cash value component
  • You can afford costly premiums

Permanent life insurance would not be worth it if you don’t need lifelong coverage. The lifelong coverage comes with costly premiums. If you don’t need lifelong coverage, you should consider term life insurance instead.

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Best Types of Life Insurance by Age

There are many factors that influence which type of life insurance would be best for you. It’s difficult to claim one life insurance is better than another when only considering your age. However, your age is the biggest factor in influencing your premium costs.

No matter what type of policy you have, the younger you are, the more affordable your premiums will be. However, some policies have bigger premium price differences compared to others.

For example, the price difference between a 30-year-old and 60-year-old for a 10-year term policy with $1 million of coverage is $203.34. For a whole life policy with $1 million of coverage, the price difference between a 30-year-old and 60-year-old is $948.06.

If you’re older, you may not be able to afford a permanent policy, such as universal or whole life. Term life insurance would likely be a better option for you.

If you’re younger, you could secure lifelong coverage with a permanent life insurance policy at an affordable price. However, if you don’t need lifelong coverage, you could also benefit from a term policy with an even lower premium.

Different Types of Life Insurance Costs by Age
Type of Policy/ Age Issued3040506070
10-Year Term Policy $36.16$53.17$111.79$239.50$706.94
20-Year Term Policy $52.25$82.71$179.44$456.70$1,727.95
Universal Life Policy$390.52$578.85$921.93$1,548.16$2,710.37
Whole Life Policy $666.94$1,003.06$1,615.00$2,726.11$4,772.28
Source: U.S. News
*Average costs are based off a healthy woman getting $1 million of coverage

Note that the estimated premiums are based on $1 million of coverage. If you don’t believe you need that much coverage, your premiums will be cheaper. You can always reach out to a financial advisor or use a life insurance calculator to help you figure out how much life insurance coverage you need.

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Pros and Cons of Life Insurance

The pros and cons of life insurance vary, depending on what type of life insurance you’re looking to purchase. Term and permanent life insurance are the two main types. They have different advantages and drawbacks, making one likely better suited for your needs over another.

Pros and Cons of Term Life Insurance
PROS
  • Affordable Premiums
  • Easy to understand
  • Some options to skip a medical exam
CONS
  • Limited coverage, only 10, 20 or 30 year term lengths
  • Death benefit not guaranteed if you outlive your policy
  • No cash value component
Pros and Cons of Permanent Life Insurance
PROS
  • Lifelong coverage
  • Cash value component
  • Guaranteed death benefit
CONS
  • Less likely to be able to skip medical exam
  • Expensive premiums
  • Policies can be difficult to understand

Life Insurance Costs and Coverage

Term is the most affordable type of life insurance, but it offers limited coverage. The two main types of permanent life insurance, whole and universal, both offer lifelong coverage. Between the two, whole life insurance is generally more expensive than universal life insurance.

Your premium cost and death benefit varies between the different types of life insurance. Some policies have a set death benefit amount and premiums, while others are flexible. If your death benefit and premiums are flexible, you can alter the amounts and payment schedule.

Term, Whole Life and Universal Life Costs and Coverage
Term Life Insurance
Set premiums and death benefit with coverage term lengths of 10, 20 or 30 years available. Premiums are typically affordable.
Whole Life Insurance
Set premiums and death benefit with lifetime coverage. Whole life is generally the most expensive type of life insurance. According to CNN, whole life premiums can cost 10 times more than a term policy.
Universal Life Insurance
Flexible premiums and death benefit with lifetime coverage. Universal life is typically more expensive than term life insurance, but more affordable than whole life insurance.
Source: U.S. News

Is Life Insurance a Good Investment?

While life insurance can be considered a beneficial investment to provide financial security for your loved ones, your life insurance policy should be viewed as a safety net of financial assurance, not as an investment tool.

“I don’t really like to frame insurance products as investments. It is possible that, on an after-tax basis, the cash value can be competitive with certain types of investments, but the primary motivation for getting life insurance should be based on its insurance benefits, not potential cash value growth,” Wade Pfau, Co-Director of the American College Center for Retirement Income, told RetireGuide.

You should consider stocks, bonds, CDs or an exchange-traded fund (EFT) as good investing tools instead of life insurance. The main goal of an investment is to achieve your financial goals. Life insurance’s main goal is to protect your loved ones if you were to pass away.

While you can grow some wealth with a permanent policy’s cash value component, you would have better luck investing with stocks or bonds.

“I don't really like to frame insurance products as investments. It is possible that, on an after-tax basis, the cash value can be competitive with certain types of investments, but the primary motivation for getting life insurance should be based on its insurance benefits and not potential cash value growth.”
Wade Pfau, Ph.D., Professor at the American College of Financial Services and Co-Director of the American College Center for Retirement Income
Last Modified: November 3, 2022
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7 Cited Research Articles

  1. LIMRA. (2022, June 5). Life Insurance Offers Sense of Security. Retrieved from https://www.limra.com/siteassets/newsroom/news-releases/2022-images/barometerpressrelease_infographic_sd_final.pdf
  2. Freedman, D. (2022, March 28). Term vs. Permanent Life Insurance. Retrieved from https://www.usnews.com/insurance/life-insurance/term-vs-permanent
  3. Hayes, M. (2022, January 29). 5 High-Return Investments to Increase Your Wealth. Retrieved from https://www.experian.com/blogs/ask-experian/high-return-investments/
  4. Johnson, H. (2022, January 20). Term Life Insurance vs. Whole Life Insurance: Which Is Best for You? Retrieved from https://www.cnn.com/cnn-underscored/money/term-life-insurance-vs-whole-life
  5. Threewitt, C. & Lob, J. (2022, January 6). Life Insurance Quotes. Retrieved from https://www.usnews.com/insurance/life-insurance/quote
  6. Insurance Information Institute. (n.d.). What Are the Principal Types of Life Insurance? Retrieved from https://www.iii.org/article/what-are-principal-types-life-insurance
  7. Lincoln Heritage Funeral Advantage. (n.d.). How Much Does a Funeral Cost? Retrieved from https://www.lhlic.com/consumer-resources/average-funeral-cost/