January marks Financial Wellness Month, making it an ideal moment to step back and evaluate your overall financial picture. While most people focus on budgeting, saving, or paying down debt, life insurance is another important piece that often gets overlooked. Many assume it is something you only need later in life, but it can be a meaningful part of your financial strategy at any age.
Life insurance helps protect the people who depend on you, prepares your household for the unexpected, and in some cases, even contributes to your broader financial goals while you are still living. Below, we will walk through the basics, explore the main types of policies, and share simple ways to ensure your coverage continues to match your needs over time.
What Life Insurance Really Provides
At its simplest, life insurance pays out money—known as a death benefit—to the individuals you choose. This payout can support your loved ones by helping cover everyday expenses such as rent or mortgage payments, childcare, medical bills, debt obligations, or final arrangements.
In other words, life insurance helps keep your family’s financial plan on track during a difficult and unpredictable time. It creates immediate financial support when your household would need it most, turning an overwhelming “what happens if…” scenario into one that is easier to navigate.
By paying your premiums on time, you keep your policy active. In return, the insurer guarantees that the benefit will be paid out according to the terms of your contract. For many families, that guaranteed protection offers valuable peace of mind and contributes to overall financial well-being.
Understanding Term vs. Permanent Life Insurance
Life insurance comes in two primary forms—term and permanent. Each works differently and serves distinct goals, so the right choice depends on your budget, stage of life, and long-term priorities.
Term life insurance
offers coverage for a defined length of time, often 10, 20, or 30 years. If you pass away during that period, your beneficiaries receive the death benefit. If you outlive the policy, the coverage ends. Term life insurance is usually the most affordable option and is especially helpful during years when financial responsibilities are high, such as while paying off a mortgage or raising children.
Permanent life insurance
stays in place for your entire lifetime as long as premiums continue to be paid. These policies also build a cash value over time, which grows tax-deferred. You may be able to withdraw or borrow against the cash value during your lifetime, though doing so can reduce the final benefit paid to your family.
Two of the most common types of permanent insurance include:
- Whole life insurance: Features fixed premiums, guaranteed cash value growth, and a guaranteed death benefit. It offers consistency and long-term stability.
- Universal life insurance: Provides flexibility with adjustable premiums and death benefits. The cash value is tied to market performance, which can create opportunities for growth but also introduces more risk.
Both forms of permanent insurance can be useful if you want lifelong protection or like having a policy that also builds savings over time.
Is Cash Value a Good Fit for Your Goals?
The cash value element in permanent policies can serve as an additional financial resource. Over time, this money can help with major expenses such as tuition, medical costs, or supplementing retirement income.
However, it is important to understand how cash value works. Growth is slow in the early years, and borrowing or withdrawing funds may reduce the amount passed on to your beneficiaries. Permanent coverage also tends to cost more than term insurance, which may not be ideal for every budget.
If you already know you want coverage that lasts a lifetime or prefer stable premiums, the cash value feature can be a helpful bonus. Still, most people should prioritize funding other savings or retirement vehicles before relying on life insurance as an investment tool.
Enhancing Your Policy With Riders
Life insurance is not one-size-fits-all. Riders—optional add-ons—allow you to customize your policy so it better supports your unique needs.
Common rider options include:
- Long-term care rider: Helps cover the cost of ongoing care if you experience a serious illness or disability that requires daily assistance.
- Terminal illness rider: Lets you access a portion of your death benefit early if you are diagnosed with a terminal condition.
- Return of premium rider: For term policies, this may allow you to receive back the premiums you paid if you outlive the term.
- Conversion option: Some term policies let you convert to permanent coverage later on without undergoing a new medical exam—helpful if your health changes.
These features can add flexibility and expand the ways your policy supports your long-term plans.
Keeping Your Life Insurance Current
Keeping your policy updated is an important part of maintaining financial wellness. A few small habits can ensure your coverage continues to fit your life.
- Review your beneficiaries annually: Make sure the right people are listed, especially after major life changes such as a marriage, divorce, or the birth of a child.
- Reevaluate your coverage amount: Changes in income, debt, or family size may mean your policy needs adjustment.
- Check conversion options: If you have term coverage, see whether you can convert it to permanent insurance without additional medical requirements.
- Schedule a yearly policy review: Just as you revisit your budget or savings goals, a quick annual check-in can help keep your protection aligned with your life.
If you’d like help evaluating your current policy or exploring new coverage options, we’re here to support you in protecting what matters most.