January is Financial Wellness Month, making it a great opportunity to reassess the different parts of your financial life. One area that often deserves more attention is life insurance. While many people assume it’s something to think about later in life, the truth is that life insurance can strengthen your financial foundation at every stage.
Life insurance protects the people who depend on you, prepares your household for the unexpected, and in some cases, can even support goals you pursue while you’re still here. Below, we’ll walk through how life insurance works, the types of policies you can choose from, and what you can do to ensure your coverage still matches your needs.
What Life Insurance Does for Your Financial Plan
Life insurance is designed to provide a payout, known as a death benefit, to the beneficiaries you name on your policy. That money can help cover large expenses like a mortgage or rent, childcare, medical bills, funeral costs, or everyday living needs.
Essentially, life insurance helps keep your family’s financial plans on track even if something happens to you. It offers quick access to funds during a difficult time and helps reduce the financial stress of an unexpected loss.
To maintain your policy, you pay premiums—usually monthly or annually. In exchange, your insurance carrier guarantees a payout as long as the policy is active. This guaranteed protection is a key reason life insurance is considered a vital part of a strong financial strategy.
Term vs. Permanent Life Insurance
Life insurance generally falls into two categories: term and permanent. Each type can support different goals depending on your budget, needs, and future plans.
Term life insurance
provides protection for a specific number of years, often 10, 20, or 30. If you pass away during the term, your beneficiaries receive the death benefit. If you outlive it, the policy simply ends. Because it’s typically the more affordable option, term life is popular for covering high‑responsibility years—such as raising children, paying off debt, or securing income replacement.
Permanent life insurance
lasts your entire life as long as premiums are paid. It also includes a cash value feature that grows over time. This savings component can be used during your lifetime, though borrowing or withdrawing from it reduces the final payout.
Permanent coverage generally comes in two forms:
- Whole life insurance offers guaranteed cash value growth, predictable premiums, and a fixed death benefit.
- Universal life insurance provides more flexibility. You can modify your premiums and death benefit, and the cash value may grow based on market performance, which means more variability but also more control.
Both term and permanent options offer valuable benefits. The best choice depends on whether you want temporary, budget‑friendly protection or lifelong coverage that includes a built‑in savings feature.
Is a Cash Value Feature Right for You?
The cash value included in permanent policies can serve as an added resource over time. It may help with larger expenses such as education costs, medical bills, or even supplementing parts of your retirement strategy.
Still, it’s important to understand how cash value grows. The early years typically build slowly, and accessing those funds may reduce your policy’s long-term benefit. Permanent coverage also costs more than term insurance, which is something to consider when comparing the two.
If you’re already confident that you need lifelong protection and appreciate stable premiums, cash value can be a meaningful added benefit. However, for many people, it’s wise to prioritize other savings and retirement plans before relying on a life insurance policy for investment purposes.
Policy Riders That Enhance Your Coverage
Life insurance can be customized through riders—optional features that allow you to tailor your policy to your situation.
For example, a long‑term care rider may help pay for extended assistance if you face a serious illness or injury. A terminal illness rider can allow early access to part of your death benefit if you receive a qualifying diagnosis. For term policies, a return‑of‑premium rider may refund what you paid in premiums if you outlive the term.
Many term policies also offer a conversion feature. This allows you to switch to permanent coverage later without completing another medical exam, which can be especially helpful if your health changes but your need for insurance continues.
These additions can make your coverage more flexible and better aligned with your long-range plans.
Simple Ways to Keep Your Coverage Updated
Regularly reviewing your life insurance ensures it still reflects your household’s needs. A few small habits can make a big difference in keeping your coverage relevant.
Start by reviewing your beneficiaries once each year. Life changes—such as marriage, divorce, or the arrival of a new child—may mean updates are needed. Then, take a look at your coverage amount. As your financial responsibilities shift, your policy may need adjustments.
If you have a term policy, see whether it offers a conversion option. This feature could provide long-term value if your health changes down the road. Finally, consider a yearly policy check—similar to reviewing your budget or savings plan. A quick review helps ensure everything still lines up with your goals.
If you’d like help reviewing your current coverage or exploring new options, we’re here to support you as you plan for the future and protect the people who matter most.