Why Life Insurance Plays a Key Role in Your Financial Well‑Being

January marks Financial Wellness Month, making it an ideal moment to step back and evaluate how all the pieces of your financial life come together. One important element that often doesn’t get the attention it deserves is life insurance. Many people assume it's something to handle later in life, but it can actually strengthen your financial foundation right now—while also protecting your future.

Life insurance helps safeguard the people you love, prepares your household for unexpected challenges, and in some cases, even supports your personal financial goals. Below, we’ll walk through what life insurance does, the major types of policies, and how to make sure your coverage continues to fit your life as it evolves.

What Life Insurance Actually Provides

At its simplest, life insurance delivers a lump-sum payment—known as a death benefit—to the people you choose. That money can be used for nearly anything your beneficiaries need: housing costs, debts, childcare, funeral expenses, or general day-to-day living.

Think of it as a safety net that helps keep your family’s financial progress on track if something happens to you. It supplies much-needed liquidity during a difficult time and helps reduce financial stress during a major loss.

In exchange for paying regular premiums, your insurer guarantees a payout under the terms of your contract. This assurance is one of the main reasons life insurance is considered a key component of long-term financial wellness.

The Two Primary Categories: Term and Permanent Coverage

Life insurance generally falls into two broad categories: term and permanent. Each type is designed for different needs, budgets, and life stages.

Term Life Insurance

Term life insurance provides coverage for a set number of years—most commonly 10, 20, or 30. If you pass away within that timeframe, your beneficiaries receive the death benefit. If you outlive the term, the policy ends.

Because it’s usually the more affordable option, term coverage is a good fit for people who want dependable protection during high-responsibility years, such as raising a family or paying down a mortgage. It’s straightforward, cost-effective, and focused on pure protection.

Permanent Life Insurance

Permanent life insurance lasts for your entire lifetime as long as premiums are paid. In addition to lifelong protection, it includes a savings component called cash value, which grows over time.

You can borrow from or withdraw a portion of this cash value while you’re alive, though doing so may reduce the death benefit your beneficiaries eventually receive.

There are two widely used types of permanent coverage:

• Whole life insurance: Offers stable premiums, guaranteed growth of cash value, and a fixed death benefit. It’s predictable and designed for long-term planning.
• Universal life insurance: Provides more flexibility. You can typically adjust your premiums and death benefit, and the cash value grows based on market conditions. Because growth depends on performance, there’s more risk—but also more control.

Both forms of permanent insurance can support long-term financial strategies, particularly if you want lifelong coverage or like the idea of having a built-in savings feature.

Is the Cash Value Feature a Good Fit?

The cash value component of permanent policies is often seen as a valuable extra. Over the years, it can accumulate enough to help with large expenses such as college tuition, medical costs, or supplemental retirement income.

However, it’s important to understand how it works. Cash value typically builds up gradually, especially in the early years of a policy. Withdrawals or loans can reduce the policy’s final payout. Also, permanent life insurance tends to come with higher premiums compared to term coverage.

If you need lifelong protection or want level premiums, the cash value feature may be worthwhile. But for many people, it’s important to make sure other savings and retirement accounts are fully funded before depending on a life insurance policy as an investment tool.

Optional Riders That Customize Your Coverage

Life insurance isn’t one-size-fits-all, and riders—optional add-ons—allow you to tailor a policy to your unique situation.

Examples of commonly used riders include:

• Long-term care rider: Helps offset the expense of long-term care if you become seriously ill or injured and require ongoing assistance.
• Terminal illness rider: Allows you to access a portion of your death benefit early if you’re diagnosed with a qualifying terminal condition.
• Return of premium rider: With some term policies, this rider refunds your premiums if you outlive your policy term.

Some term policies also offer the ability to convert to permanent coverage without undergoing another medical exam. This can be especially helpful if your health changes but you still want long-term protection.

These enhancements can make your policy more adaptable and aligned with your long‑term goals.

Simple Ways to Keep Your Policy Up to Date

Just like reviewing your budget or savings plan, checking in on your life insurance each year helps ensure your coverage still fits your life. Here are a few easy habits that make a big difference:

• Review your beneficiaries annually: After major life events—such as marriage, divorce, or welcoming a child—confirm that the right people are listed on your policy.
• Evaluate your coverage amount: If your income, debts, or family responsibilities have changed, your policy may need to be adjusted.
• Check for conversion options: If you have term coverage, see whether you can convert it to a permanent policy without new medical exams.
• Make an annual policy review part of your routine: A quick check each year keeps your coverage aligned with your financial plan.

If you’d like help reviewing your current life insurance or evaluating your options, reach out anytime. We’re here to support you as you plan for the people and priorities that matter most.