January is widely known as Financial Wellness Month, making it an ideal moment to reevaluate your financial habits and overall strategy. One important element many people overlook is life insurance. Although it is often associated with later stages of life, it can play a meaningful role in protecting your financial stability right now and well into the future.
Life insurance helps safeguard those who depend on you, provides a buffer against unexpected events, and in certain cases, can even complement your personal financial planning while you’re still alive. Below, we’ll break down the basics, explore the different types of life insurance, and discuss how to make sure your policy still aligns with your current needs.
What Life Insurance Actually Does
Life insurance is designed to provide a payout—known as a death benefit—to the people you choose as beneficiaries if you pass away. This money can help cover major expenses such as rent or mortgage payments, outstanding debt, funeral costs, child care, and everyday living needs.
Essentially, life insurance keeps your family’s financial goals moving forward, even if the unexpected happens. It offers immediate liquidity at a time when resources might otherwise be limited, turning an overwhelming situation into something far more manageable.
In exchange for keeping up with your premiums, your insurer guarantees this financial protection under the terms outlined in your policy. That added layer of security is one reason life insurance is often viewed as an important piece of overall financial wellness.
Understanding Term vs. Permanent Life Insurance
There are two primary categories of life insurance: term and permanent. Each type serves different needs, depending on your financial goals, your stage of life, and your long-term priorities.
Term life insurance
provides protection for a set number of years—commonly 10, 20, or 30. If you pass away during that timeframe, your beneficiaries receive the death benefit. If the term ends while you're still living, the coverage simply expires. Term policies are often more affordable and are a good fit for individuals who want financial protection during high-responsibility years, such as raising children or paying down a mortgage.
Permanent life insurance
lasts for your entire lifetime, provided premiums are paid. It also includes a savings component known as cash value, which grows over time. You can borrow from or withdraw this cash value while alive, though doing so may reduce the final payout to your beneficiaries.
Common types of permanent insurance include:
Whole life insurance
offers level premiums, guaranteed cash value growth, and a dependable death benefit. It prioritizes long-term stability and predictability.
Universal life insurance
provides more flexibility. You can adjust your premiums and death benefit, and the cash value typically grows based on market performance. While this can offer greater control, it also introduces additional risk depending on how the market behaves.
Both kinds of permanent coverage can support long-term planning, especially if you prefer lifelong protection or appreciate the added savings component.
Is Cash Value a Good Fit for You?
The cash value feature in permanent life insurance is often considered an added perk. Over time, it can be used to help pay for large expenses, such as education costs, medical needs, or even supplemental retirement income.
That said, it’s important to understand how it works. Cash value growth tends to be slow in the early years, and borrowing or withdrawing funds can reduce the death benefit later on. Permanent policies also typically cost more than term insurance.
If you already know you need lifetime coverage or prefer fixed premiums, the cash value component may enhance the value of your policy. However, many people may want to prioritize maximizing contributions to traditional savings and retirement accounts before relying heavily on a life insurance policy for investment purposes.
Optional Add-Ons That Personalize Your Coverage
Life insurance does not have to be one-size-fits-all. Many policies offer optional add-ons, called riders, that give you the ability to tailor your coverage to your specific situation.
For example, a long-term care rider
can help pay for care if you experience a serious illness or injury that requires ongoing assistance. A terminal illness rider
allows you to access part of your death benefit early if you are diagnosed with a qualifying illness. If you choose a term policy, a return of premium rider
may allow you to recover the premiums you’ve paid if you outlive the term.
Some term policies even include a built-in option to convert to permanent insurance without needing to complete another medical exam. This can be especially valuable if your health changes over time.
These added features can make your policy more adaptable and more aligned with your long-term goals.
Simple Ways to Keep Your Policy Up to Date
Maintaining your life insurance is an important part of staying financially healthy. Here are a few easy habits to help ensure your policy continues to meet your needs:
First, review your beneficiaries annually. This is especially crucial after major life events like marriage, divorce, or the birth of a child. Next, consider whether your coverage still matches your current financial situation. Changes in income, debt, or family size may mean it’s time to adjust your policy.
If you have a term policy, check whether it includes a conversion option. This feature may give you the ability to switch to permanent coverage later without undergoing new medical tests—something that can be helpful if your health has shifted.
Finally, treat your life insurance review the same way you might approach your yearly budgeting or savings check-in. A quick annual review can make sure your protection remains aligned with your needs.
If you’d like help reviewing your current policy or exploring new options, we’re here to support you as you work to protect what matters most.