Is Life Insurance Worth It?

5 min read

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Life insurance can be a smart way to shield your loved ones from financial stress if something happens to you. It provides financial support to cover expenses like mortgage payments, education costs and everyday living expenses, helping your family avoid financial strain.

But before you decide whether life insurance is the right move, it’s important to understand all the factors involved and how they fit into your life. To help you on this journey, we’ll get into how life insurance really works, what’s great about it and what to watch out for.

Understanding Life Insurance

Essentially, think of life insurance as a financial protection shield of security for your loved ones.

When you purchase life insurance, you agree to pay regular premiums (i.e., monthly, quarterly or annually) to the insurance provider. In return, the company agrees to provide a lump-sum payment (death benefit payment) to your approved beneficiaries. As long as your policy is paid up to date, this payout will occur if you were to pass away.

There are two main types of life insurance:

Term Life Insurance: This covers you for a specific term (e.g., 10, 20 or 30 years). Premiums remain the same during the specified term, and if you pass away, your beneficiary receives the death benefit. Term life insurance is generally more affordable than whole or permanent life insurance.
Permanent Life Insurance: Also known as whole life insurance, this coverage lasts your entire life and provides a cash value feature that can grow over time, as long as premiums are paid. Permanent life insurance costs more than term coverage, but typically builds “cash value” and you may be able to utilize funds while you’re still alive if ever needed.

How to Determine Cost of Life Insurance

Whether you select Term or Whole life insurance, the premium cost is impacted by a number of factors. So, how do you know how much you’ll pay? Well, the cost depends on a few different things:

Age: When it comes to cost, age matters. Generally, the younger you are, the lower your premiums will be depending on your health. The longer you wait to start, the more likely you are to pay higher premiums.
Health: Your health status matters as well. Non-smokers and those with no pre-existing conditions generally will pay lower rates. On the other hand, having a chronic condition like high blood pressure, high cholesterol, heart disease or diabetes may make the premiums higher.
Coverage Amount: The higher the coverage amount, the higher the premium. This is because the insurance company takes on a greater risk by providing a larger payout in the event of your death.
Type of Policy: The type of life insurance policy you choose significantly impacts the cost. Read our article on the different types of life insurance for more information.

Understanding what affects your premium rate can help you make the best decisions for you and your family. For more details, check out our article on life insurance premiums.

Factors to Consider: The Big Picture

Life moves quickly, so it’s smart to take a moment now to plan ahead, especially when it comes to life insurance. Here are some important things to think about to make sure you’re covering all your bases:

Looking After Loved Ones: This is one of the most important areas to consider when planning your finances. If you have dependents (whether it's a spouse, children, or aging parents), life insurance is worth a closer look. Picture your spouse comfortably handling mortgage payments or your kids confidently pursuing their college dreams. With life insurance, you’re helping your loved ones maintain their current lifestyle and achieve their future goals.

Finding What You Can Afford: As discussed above, life insurance costs vary based on multiple factors like age, health and coverage amount. It’s more affordable when you’re younger. Consider your budget and whether you can comfortably pay the premiums. Having some protection may be better than no coverage at all, so consider selecting coverage that fits with your budget.

Taking Stock of Your Financial State: You’ll want to evaluate your debts (e.g. mortgage, student loans, auto loans, personal loans) and other financial responsibilities. If your family would struggle without your income, life insurance becomes more valuable. The general rule of thumb is for a payout to be around 7-10x your annual income.

Planning for Final Expenses: Funerals can be costly, and your loved ones may not have the cash to cover the bill. Life insurance can be used to cover final expenses, such as a burial or cremation and medical expenses.

Benefits of Life Insurance at Every Stage of Life

You might think life insurance is just for those who are older and more established, but it can really provide essential protection at all stages of life. Here are some benefits to consider based on your potential circumstances:

When You’re Young and Single: Locking in rates while you’re young and healthy can pay off in the long term.
When You’re Starting a Family: Life insurance can help to provide stability and security, ensuring your family’s financial needs are met, including education and daily living expenses.
When You Own Your Home: It can help cover mortgage payments so your family can stay in their home if you pass away unexpectedly.

In addition to savings accounts, college funds and other investments, life insurance offers an extra layer of financial security. It provides benefits that these other products may not, such as the immediate financial support for your beneficiaries.

What to Know Before You Commit

Before you dive into a life insurance plan, it’s important to take a closer look at a few additional factors. Here’s what you need to keep in mind:

Cost of Coverage: Life insurance premiums require regular payments. For young individuals or those with limited income, budgeting for these premiums may require a bit more planning.
Navigating the Fine Print: It’s no surprise that policy documents can be intricate, but understanding the terms and exclusions is important. For more details on this, check out our article on understanding life insurance contract fine print.
Keeping Up with Your Policy: To make sure your coverage aligns with your evolving needs, you’ll want to regularly review your policy. You may occasionally need to adjust beneficiaries, update contact information and review policy details. An annual review is highly recommended.

For most people with financial responsibilities (children, mortgage, managing debt), the pros of having life insurance outweigh the cons. The primary advantage — financial protection for your loved ones — makes it worth exploring your policy options. Take time to consider your unique situation. We’re here to help if you have questions or concerns.

To explore your life insurance options with Gerber Life, call us today at 1-800-704-2180. Our knowledgeable, licensed and friendly Customer Service Representatives will be happy to answer your questions.