Why Life Insurance Plays a Key Role in Your Financial Health

January marks Financial Wellness Month, making it an ideal moment to step back and review how well your financial strategy supports your long‑term goals. One area that people often push to the bottom of the list is life insurance. Many assume it’s only necessary later in life, but in reality, life insurance can be an essential tool for protecting both your present and future financial well‑being.

Life insurance safeguards the people who depend on you, helps prepare your household for unexpected events, and in some cases, even contributes to your personal financial goals while you’re still alive. Below, we’ll break down what life insurance does, the different types of coverage, and how to make sure your policy still aligns with your needs.

What Life Insurance Really Provides

At its simplest, life insurance delivers a payout—known as a death benefit—to the beneficiaries you designate if you pass away. This money can be used to cover essential expenses like mortgage or rent payments, outstanding debts, funeral costs, childcare, or regular household needs.

In other words, life insurance helps keep your family’s financial life moving forward even if something unexpected happens. It provides much‑needed liquidity at a time when your loved ones may be feeling both emotional and financial strain. By paying regular premiums, you keep your policy active, and in return, your insurer guarantees a benefit as outlined in the contract. That financial security is why life insurance is widely considered a foundational component of a healthy financial plan.

Understanding Term vs. Permanent Life Insurance

Life insurance typically falls into two major categories: term and permanent. Each type serves different purposes, so your choice depends on your financial priorities, stage of life, and long‑term goals.

Term life insurance covers you for a set number of years—commonly 10, 20, or 30 years. If you pass away during the coverage period, your beneficiaries receive the death benefit. If you outlive the term, the policy expires. Term insurance tends to be the more budget‑friendly option and is often ideal during your highest‑responsibility years, such as raising children or paying down a mortgage.

Permanent life insurance remains active for your entire lifetime as long as premiums are paid. It also includes a savings component called cash value, which grows over time. You can borrow from or withdraw this cash value while you’re alive, though doing so may reduce the amount your beneficiaries receive later.

Two common forms of permanent coverage include:

• Whole life insurance: Offers guaranteed cash value growth, consistent premiums, and a fixed death benefit. It’s a stable, predictable choice for those who prefer long‑term certainty.
• Universal life insurance: Provides more flexibility. You can adjust premiums and the death benefit, and the cash value often grows based on market conditions. This option gives you greater control but may come with more financial risk.

Both types of permanent insurance can be valuable if you want lifelong coverage or like the idea of having a policy that also functions as a savings vehicle.

Should You Consider Cash Value?

The cash value inside a permanent life insurance policy is frequently viewed as a helpful bonus. Over time, this money can be used to cover significant expenses—such as education costs, medical bills, or even certain retirement needs.

However, it’s important to understand how cash value works. It generally grows gradually, especially in the early years. Loans or withdrawals can also reduce the payout your beneficiaries receive. Permanent life insurance is also more costly than term policies, which can impact your budget.

If you know you need lifelong protection or you appreciate the certainty of fixed premiums, cash value may be a useful addition. But many people should prioritize building emergency savings and retirement accounts before relying on a life insurance policy for investment purposes.

Customizing Your Coverage With Riders

Life insurance isn’t meant to be one‑size‑fits‑all. That’s why many policies allow you to add riders—optional features that enhance your coverage so it better matches your personal needs.

Some helpful riders include:

• Long‑term care rider: Helps cover the cost of care if you become unable to perform daily activities due to injury or illness.
• Terminal illness rider: Allows you to access part of your death benefit early if you’re diagnosed with a terminal condition.
• Return‑of‑premium rider: Available on some term policies; refunds your premiums if you outlive your policy term.
• Conversion option: Lets you convert term insurance into permanent coverage without taking a new medical exam—useful if your health changes.

These add‑ons can make your policy more adaptable and supportive of your long‑term plans.

Keeping Your Life Insurance Updated

Reviewing your policy regularly is an essential part of staying financially prepared. Here are a few simple ways to keep your coverage current:

• Check your beneficiaries yearly: Make sure your listed beneficiaries still reflect your intentions, especially after major life events like marriage, divorce, or the birth of a child.
• Reevaluate your coverage amount: As your income, debt levels, or family needs change, your policy may need updating.
• Review your term policy options: Look into whether your term plan includes a conversion feature, which can be valuable if you later decide you want permanent coverage.
• Schedule an annual policy review: Treat it like reviewing your budget—quick, simple, and incredibly helpful for staying on track.

If you’d like help reviewing your life insurance or exploring your options, reach out anytime. We’re here to support you in protecting the people and priorities that matter most.