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 evaluate how well your financial plans support your life today and in the long run. One area people often overlook is life insurance. Many assume it’s only necessary later in life, but the truth is, it can be a foundational part of your financial stability at any age.

Life insurance offers protection, prepares your loved ones for the unexpected, and—depending on the type of coverage—can even contribute to your personal financial goals while you’re still here. Below, we’ll break down how life insurance works, explore different policy types, and share tips on keeping your coverage aligned with your current needs.

What Life Insurance Actually Does

At its simplest, life insurance provides a payout called a death benefit to the people you designate if you pass away. Your beneficiaries can use these funds for essential expenses such as housing costs, child care, debt payments, funeral arrangements, or day-to-day living needs.

Think of life insurance as a safeguard that keeps your family’s financial plans steady during a difficult and uncertain time. It provides liquid funds exactly when they’re needed most, helping ease the burden of “what happens if…”

You keep your policy active by paying premiums on a regular schedule. In exchange, your insurer promises a payout according to the terms of the policy. This assurance is a major reason why life insurance is often seen as an important pillar of long-term financial wellness.

The Difference Between Term and Permanent Life Insurance

Life insurance generally falls into two categories: term and permanent. Each option fits different goals, stages of life, and budgets.

Term Life Insurance

Term life insurance protects you for a specific period, commonly 10, 20, or 30 years. If you pass away within that window, your beneficiaries receive the death benefit. If you outlive the term, the policy expires. Because of its simplicity and lower price point, term coverage is a popular choice during years when financial responsibilities are highest—like raising children or paying off a home.

Permanent Life Insurance

Permanent life insurance stays in effect for your entire lifetime as long as you continue making premium payments. It also includes a cash value component, which accumulates gradually over time. You can access this value through loans or withdrawals, though doing so may reduce your future death benefit.

Two of the most common forms of permanent coverage include:

• Whole life insurance: Comes with fixed premiums, guaranteed cash value growth, and a guaranteed death benefit, offering long-term consistency and predictability.
• Universal life insurance: Provides more flexibility, allowing you to adjust payments or even your death benefit. The cash value grows based on market performance, which can offer opportunities for growth but also carries more risk.

Both permanent options can be valuable for individuals seeking lifelong protection or those who appreciate the built-in savings element.

Is Cash Value a Good Fit for You?

The cash value included in permanent life insurance is often seen as a helpful bonus. Over time, it may support large expenses such as education costs, medical needs, or a portion of retirement income.

However, it’s important to understand that cash value takes time to grow. Early withdrawals or borrowed amounts can reduce your beneficiaries’ payout. Permanent life insurance is also more expensive than term coverage, which is worth considering when budgeting.

If you want lifetime protection or steady, predictable premiums, cash value can be a meaningful feature. Still, many people benefit from ensuring their retirement accounts and other savings strategies are funded first before relying heavily on life insurance for investment purposes.

Extras That Personalize Your Policy

Life insurance can be customized through riders, which are optional add-ons designed to tailor your coverage to your specific situation.

Common riders include:

• Long-term care rider: Helps pay for care if you become seriously ill or injured and need extended support.
• Terminal illness rider: Allows early access to part of your death benefit if you're diagnosed with a qualifying terminal condition.
• Return of premium rider (for term policies): Returns the premiums you’ve paid if you outlive your policy term.

Some term policies also give you the option to convert to permanent coverage without undergoing another medical exam. This can be especially helpful if your health changes or your long-term needs evolve.

These enhancements can add flexibility and make your policy more aligned with your goals over time.

Simple Ways to Keep Your Policy Up to Date

Reviewing your life insurance periodically is an important part of staying financially healthy. A few simple habits can ensure your coverage continues to work for you:

• Check your beneficiaries annually: Update them after life changes like marriage, divorce, or welcoming a new child.
• Assess your coverage amount: Make sure it still reflects your current income, financial obligations, and family needs.
• Review conversion options: If you have a term policy, find out whether you can convert to permanent coverage later—especially valuable if your health changes.
• Set a yearly review reminder: Just like revisiting your budget or savings plan, a quick policy check can ensure you’re always protected.

If you’d like help reviewing your existing life insurance or exploring new options, reach out anytime. We’re here to help you protect what matters most.