Start the Year by Strengthening Your Financial Foundation
January marks Financial Wellness Month, making it a great opportunity to step back and assess your overall financial game plan. While many people think of budgeting, saving, and investing first, life insurance is another essential piece that often gets overlooked. Even though it’s commonly associated with later stages of life, coverage can support your financial stability right now and well into the future.
Life insurance can help safeguard the people you care about, prepare your loved ones for life’s uncertainties, and in some situations, even contribute to your own long-term goals while you’re still here to enjoy them. Below, we’ll break down the basics of how life insurance works, the different types you can choose from, and how to make sure the policy you have still fits your needs.
Understanding the Purpose of Life Insurance
At its simplest, life insurance creates a financial safety net for your beneficiaries. When you pass away, the policy provides a lump-sum payment—known as the death benefit—to the people you choose. They can use that money for major expenses such as mortgage payments, rent, credit card balances, funeral costs, child care, or everyday living needs.
In other words, life insurance helps keep your loved ones’ financial lives on track during an emotionally difficult time. It ensures there’s accessible cash when it matters most and helps turn an overwhelming “what happens if…” scenario into something more manageable.
You keep the policy active by paying regular premiums. In exchange, your insurer guarantees a payout as long as the agreement terms are met. That sense of financial assurance is one reason life insurance is often considered a foundational element of a well-rounded financial plan.
Comparing Term and Permanent Life Insurance
Most policies fall into one of two categories: term life or permanent life insurance. Each option supports different financial goals, and choosing the right fit depends on your priorities, stage of life, and budget.
Term life insurance
provides protection for a set period—most commonly 10, 20, or 30 years. If you pass away during that timeframe, your beneficiaries receive the death benefit. If the term ends before that happens, the coverage expires. Term life insurance is typically more affordable and works well for people who want solid financial protection during high-responsibility years, such as while raising a family or paying down a mortgage.
Permanent life insurance
lasts for your entire lifetime as long as you keep up with the premium payments. These policies also include a cash value component that gradually grows over time. You may be able to borrow against the cash value or withdraw from it, though doing so can reduce the final death benefit.
Two of the most widely used forms of permanent life insurance are:
- Whole life insurance:
Offers steady premiums, predictable cash value growth, and a guaranteed death benefit. It’s built for stability and long-term consistency.
- Universal life insurance:
Provides more flexibility. You can adjust your premium payments and potentially your death benefit. The cash value grows based on market performance, which means it can carry more risk but also offers greater control.
Both permanent options can be useful if you want lifetime protection or the added benefit of a built-in savings tool.
Should You Consider the Cash Value Feature?
The cash value portion of a permanent policy is often viewed as an appealing extra benefit. Over time, these funds can help pay for large expenses like tuition, unexpected medical needs, or even supplement your retirement income. But it’s important to understand how this feature works before relying on it.
Cash value builds slowly in the early years of a policy, and loans or withdrawals may reduce the amount your loved ones receive later. Permanent life insurance also comes with higher premiums than term policies, so it’s essential to make sure it fits comfortably in your financial plan.
If you need lifelong coverage or prefer predictable premiums, cash value may be a helpful advantage. However, many people should prioritize contributing to other retirement or investment accounts before depending on life insurance as an investment strategy.
Customizing Your Policy With Riders
Life insurance isn’t a one-size-fits-all solution, which is why insurers offer riders—optional add-ons that help tailor your policy to your unique needs.
For example, a long-term care rider may help offset the cost of care if you become seriously ill or disabled. A terminal illness rider could allow you to access part of your death benefit early if you receive a terminal diagnosis. And if you choose term life insurance, a return-of-premium rider might give you back the premiums you’ve paid if you outlive the policy.
Some term policies also allow for a conversion to permanent coverage without requiring a new medical exam. This feature can be valuable if your health changes later and you still want lifelong protection.
Riders can make your policy more flexible and tailored to your long-term plans, giving you confidence that your coverage evolves with you.
Simple Ways to Keep Your Life Insurance Current
Maintaining your policy is an important part of staying financially healthy. A few regular check-ins can help ensure your coverage continues to reflect your life today.
- Review your beneficiaries annually:
Life changes—such as marriage, divorce, or a new child—can affect who you want listed. Make sure those names are up to date.
- Evaluate your coverage amount:
Consider whether your income, debts, or family situation have changed. You may need more (or less) coverage than before.
- Check for conversion options:
If you currently have term life insurance, confirm whether your policy allows you to convert to permanent coverage later without medical underwriting.
- Set a yearly reminder:
Treat your policy review like an annual financial checkup—similar to reviewing your budget or savings contributions.
Staying on top of your coverage ensures your policy continues to support the people and priorities that matter most.
If you’d like help reviewing your current policy or exploring your options, reach out anytime. We’re here to support you in building a financial plan that protects your future—and the people you care about most.
