If anyone depends on you for financial support, you should own a life insurance policy for their protection. Over the course of a policy, life insurance costs much less than the amount of money your family would receive if you died.
For many people, the price is worth the peace of mind that their loved ones would be taken care of. And yet, a recent Policygenius survey found that 49% of the sandwich generation (people with a parent age 65 or older who also are raising children or supporting adult children) doesn’t have a life insurance plan to help financially support their loved ones after they die.
Who needs life insurance?
If you have financial obligations that would fall on others if you died, you need life insurance coverage. A few examples include:
Children
A mortgage
The upkeep of a business
Everyday expenses shared with a partner
By taking out a life insurance policy and naming your loved ones as beneficiaries, they can file a claim if you die while your policy is active. Then, the insurance company would pay them the death benefit — most often distributed as a tax-free lump sum. The extra money can protect them from financial hardship and allow them to maintain their lifestyle.
Your policy proceeds can provide financial security for anyone whose finances will be impacted if you pass away and no longer provide an income. That includes your:
Spouse
Children
Aging parents
Other family members
Business partner
Learn how to calculate how much life insurance you need
Why should you get life insurance?
It’s worth buying coverage to protect your family because the benefits of buying life insurance outweigh the costs. Often, you’ll spend far less for coverage than the amount of money your family would receive when you die.
For example, a healthy 30-year-old female can expect to pay an average of $23 per month for a 20-year policy with a $500,000 payout, while a healthy 40-year-old female would pay around $35 per month, according to Policygenius data.
Over the lifetime of the policy, the total premiums — $5,520 and $8,400 over 20 years, respectively — are a fraction of what your beneficiaries would get if you were to die while the policy is in effect.
There are no restrictions on spending the death benefit. Common uses include:
Child or dependent care: If both figures are adjusted for inflation, [1] the estimated cost of raising a child through age 17 is nearly $296,515 in 2023, [2] and nursing home care can reach $134,352 per year. [3]
Everyday expenses: Including bills, food, house cleaning, and other everyday needs.
End-of-life medical costs: Out-of-pocket expenses can be up to $9,000 in the final year of life. [4]
Funeral expenses: Burial or cremation services cost $7,000 on average.
Future education expenses: One year of college, including tuition, room and board, fees, transportation, etc., costs on average, $27,940 for a public four-year school in state, and $57,570 for a private four-year school. [5]
Investing: Funds can go toward your partner’s retirement, an inheritance for your children, or a tax-advantaged education account, like a 529 plan.
Outstanding debts: Mortgages, business loans, or student loans are common debts that can be paid off with a life insurance benefit.
Learn more about the benefits of having life insurance protection
Types of life insurance
While there are many different types of life insurance, when you shop for a policy you usually have to choose between two main types: term life and whole life insurance.
Term life insurance
Term life insurance is one of the most affordable life insurance coverage options on the market. It only lasts for a set number of years — usually 10 to 30 — and it comes with few tax rules and restrictions. Term life is designed to cover you during the time when you have the most financial obligations, like raising children or paying down a mortgage.
When working as a licensed life insurance agent, I’d advise clients that term life is the best option for most people looking to provide their family with a financial safety net.
Common life insurance term lengths
Whole life insurance
Whole life and other types of permanent life insurance are good options for high-net-worth individuals or people who have permanent financial obligations, like dependents who need lifelong care.
Whole life insurance never expires and comes with a cash value investment feature in addition to the death benefit payout. It’s much more expensive than term life insurance.
If you’re already maximizing your contributions to tax-advantaged accounts like a Roth IRA or a 401(k) and are seeking another investment option, whole life might work for you.
Learn more about the differences between term life and whole life insurance
Final expense insurance
Final expense life insurance — also called burial insurance — is a type of permanent coverage designed to cover your funeral and burial costs. It usually offers low coverage amounts, up to $50,000, and you don’t need to take the medical exam that’s a standard part of the underwriting process for approval.
If you don’t have dependents or major financial obligations and only want to cover end-of-life costs, final expense insurance could be a good fit for you. Final expense policies are typically available for people age 45 and up, but some insurers offer them for younger applicants, too.
Read more about graded death benefits
Comparing term vs. whole vs. final expense insurance
Life insurance type | Coverage length | Medical exam required | Builds cash value | Death benefit payout | Premiums |
|---|---|---|---|---|---|
Term | 10 years to 40 years | Not always | No | $100,000+ | Fixed |
Whole | Life | Yes | Yes | $50,000+ | Fixed |
Final expense | Life | No | Yes | Up to $50,000 | Fixed |
How much does life insurance cost?
A healthy 30-year-old who doesn’t smoke could pay between $23 and $30 per month for a $500,000 term life policy that lasts for 20 years. Whole life is much more expensive than term life. The same 30-year-old could pay between $415 and $487 per month for $500,000 of whole life coverage — around 17 times more than they would for a comparable term life policy.
These sample rates below are for non-smokers who fall into the Preferred health classification, which comes with the second-lowest rates and is usually reserved for people considered healthy by life insurance standards. Your age, gender, health, lifestyle habits, and the type of policy you buy will determine how much you’ll pay for life insurance.
Age | Gender | $500,000 20-year term life policy | $500,000 30-year term life policy | $500,000 whole life policy |
20 | Female | $22.65 | $30.97 | $290.00 |
Male | $30.20 | $40.53 | $347.00 | |
30 | Female | $22.98 | $34.52 | $414.50 |
Male | $29.32 | $42.45 | $487.00 | |
40 | Female | $35.27 | $54.87 | $605.50 |
Male | $42.94 | $68.28 | $737.00 | |
50 | Female | $78.29 | $129.12 | $957.00 |
Male | $102.50 | $174.15 | $1,1,34.50 |
Methodology: Average monthly term life insurance rates are for male and female non-smokers with a Preferred health classification buying a 20-year or 30-year $500,000 term life insurance policy. Term life insurance averages are based on a composite of policies offered through Policygenius from Brighthouse Financial, Corebridge Financial, Foresters Financial, Legal & General America, Lincoln Financial, Mutual of Omaha, Pacific Life, Protective, Prudential, Symetra, and Transamerica. Average monthly whole life insurance rates are calculated for non-smokers in averaged Preferred Plus and Standard health classifications, obtaining a whole life insurance policy fully paid up at age 100 through MassMutual. Rates may vary by insurer, term, coverage amount, health class, and state. Not all policies are available in all states. Rate illustration valid as of 01/01/2024.
If you want to learn more about life insurance quotes and the right type of coverage for your personal situation, connect with a Policygenius agent. At Policygenius, our experts are licensed in all 50 states and can walk you through the entire life insurance buying process while offering transparent, unbiased advice.
When isn’t life insurance worth it?
We’re advocates for a financial plan that includes life insurance coverage — but sometimes, you just don’t need it. Two common scenarios when you don’t need a life insurance policy include:
You don’t have any dependents, and don’t plan to. If you don’t plan to get married or have a family and no one depends on you for financial support, getting coverage might not be the most worthwhile use of your budget.
You can pay your own way. If you have enough liquid cash to cover your debts and end-of-life expenses, you probably don’t need a policy. (Though if you have a high net worth, you may still want to use life insurance as an estate planning tool.)
Speaking with a certified financial planner about whether or not you need life insurance coverage is the best way to ensure that foregoing a policy won’t have any financial ramifications.
