January marks Financial Wellness Month, making it a natural moment to evaluate your overall financial strategy. While budgeting, saving, and investing often get the most attention, there’s another essential element that sometimes gets pushed aside—life insurance. Many people assume it’s only relevant later in life, but life insurance can support your financial wellbeing at every stage.
Life insurance can help shield the people you care about, create stability during uncertain times, and in some cases, even contribute to your financial goals while you’re still here. Below, we’ll walk through what life insurance actually does, the different types of policies you can choose from, and how to ensure your coverage evolves as your life changes.
What Life Insurance Actually Provides
At its most basic level, life insurance delivers a payout—called a death benefit—to the individuals you designate if you pass away. That payout can be used for a wide range of financial needs, such as housing costs, credit card balances, funeral arrangements, childcare, or everyday living expenses.
In other words, life insurance helps keep your family’s financial plan moving forward even if you’re no longer there to provide for them. It offers quick access to funds at a moment when they may be needed most, turning a stressful “what if” scenario into something more manageable.
You maintain your policy by paying regular premiums. In exchange, the insurer commits to honoring the terms of the contract and providing the promised payout. This assurance is one of the reasons life insurance is widely viewed as a foundational part of long-term financial wellness.
Understanding Term vs. Permanent Life Insurance
Life insurance generally falls into two categories: term and permanent. Each one serves a different purpose, and the right match depends on your goals, your budget, and where you are in life.
Term life insurance
offers coverage for a set number of years—often 10, 20, or 30. If you pass away while the policy is active, your beneficiaries receive the death benefit. If you outlive the term, the policy ends. Because term coverage is usually more affordable, it’s a popular choice for individuals who want protection during high‑responsibility years, such as raising children or paying off a mortgage.
Permanent life insurance, in contrast, lasts for your entire lifetime as long as you continue paying the premiums. It also includes a savings component known as cash value, which grows over time. You can borrow from or withdraw this cash value while still alive, though doing so may reduce the final benefit paid to your loved ones.
Within permanent life insurance, there are two main options:
- Whole life insurance: Features fixed premiums, guaranteed increases in cash value, and a guaranteed death benefit. It offers stability and predictability, making it appealing for long-term planners.
- Universal life insurance: Provides more flexibility. You can adjust your premiums and death benefit, and the cash value grows based on market conditions. This type allows more control but may involve greater risk depending on market performance.
Both types of permanent insurance can be valuable if you want lifelong coverage or like the idea of having a policy that can accumulate savings over time.
Is Cash Value a Good Fit for Your Needs?
The cash value within permanent life insurance is often viewed as an attractive perk. Over the years, it can become a source of funds you may tap for large expenses such as education, medical needs, or supplemental income during retirement.
That said, it’s important to have realistic expectations. Cash value usually builds slowly—especially in the early years—and taking loans or withdrawals can lower the amount your beneficiaries eventually receive. Permanent life insurance is also more expensive than term life, which is something to consider when budgeting.
If you want lifelong protection or prefer stable, predictable premiums, the cash value feature can be a nice additional benefit. However, many financial professionals recommend prioritizing other savings vehicles first before relying on a life insurance policy as an investment tool.
Riders: Customizing Your Coverage
Life insurance isn’t always a one-size-fits-all solution. That’s where policy riders come in. These optional additions help tailor your coverage to your specific needs.
For instance, a long-term care rider can help pay for ongoing care if you experience a serious illness or injury that limits your independence. A terminal illness rider allows you to access a portion of your death benefit early if you’re diagnosed with a terminal condition. If you opt for term coverage, a return-of-premium rider may refund what you’ve paid if you outlive the policy.
Some term policies also allow you to convert to permanent coverage later on without undergoing another medical exam. This can be incredibly useful if your circumstances shift or your health changes, making it harder to obtain new coverage in the future.
These add-ons can make your policy more adaptable, more robust, and better aligned with your long-term financial strategy.
Simple Ways to Keep Your Policy Up to Date
Just as your financial situation evolves, your life insurance should evolve with it. A few small habits can help keep your coverage relevant and effective.
- Review your beneficiaries annually: Double-check that the right individuals are listed—especially after major life events such as marriage, divorce, or welcoming a child.
- Reevaluate your coverage needs: If your income, debts, or family size has shifted, your policy may need adjustments.
- Look into conversion options: If you have term insurance, see whether you have the option to convert to permanent coverage without new medical tests.
- Do a yearly policy check-in: Think of it like reviewing your budget or savings plan—a quick annual review helps ensure everything stays aligned with your goals.
If you’d like help understanding your existing coverage or exploring new options, reach out anytime. We’re here to support you in protecting the people and priorities that matter most.
