Is life insurance worth it for you?

[UNITED STATES] Life insurance isn't a one-size-fits-all solution. Whether it’s a smart investment depends largely on your personal circumstances and who you aim to protect. Even if you do need coverage, some types of life insurance may offer more value than others.

Data from LIMRA reveals a steady decline in life insurance ownership across the U.S., dropping from 63% in 2011 to just 52% in 2023. The downturn underscores a growing gap in financial literacy when it comes to life insurance—especially as families grapple with inflation, rising healthcare expenses, and other economic challenges.

So, when does life insurance actually make sense? And when can you safely skip it?

When Life Insurance Makes Sense

Life insurance is generally worth considering if your absence would leave others financially vulnerable. This often includes spouses, children, or other dependents.

Younger Americans—particularly millennials and Gen Z—frequently underestimate the value of life insurance, often due to concerns about cost or the belief that it’s only relevant later in life. However, purchasing a policy early can lock in lower premiums and provide financial peace of mind, especially for those starting families or managing large debts such as student loans.

Here are some situations where life insurance may be a worthwhile investment:

• You have dependents who rely on your income
• You carry significant debt or financial obligations
• You own a home and are paying off a mortgage
• You run a business and want to safeguard its continuity
• You aim to leave an inheritance
• You care for dependents with special needs or aging parents
• You have substantial assets and estate planning considerations

When You May Not Need Life Insurance

Conversely, there are scenarios in which life insurance may not be necessary. For example:

• You’re single with no financial dependents
• You’re retired and financially independent
• You carry little or no debt
• Your estate can comfortably cover final expenses
• You already have sufficient coverage through your employer

However, it's important to review the limitations of employer-sponsored life insurance. These policies typically cover only 1–2 times your annual salary—an amount that may fall short for those with more substantial financial responsibilities. Experts recommend assessing your workplace coverage and exploring supplemental policies if needed.

Key Reasons to Consider Life Insurance

To Protect Loved Ones

“If you don’t make it home and someone depends on your income, you need life insurance,” says Mark Williams, CEO of Brokers International. A death benefit can replace lost income, cover essential services, and help maintain your family’s standard of living.

In fact, the National Association of Insurance Commissioners (NAIC) reported an average payout of $250,000 in 2024. That benefit can go a long way toward funding childcare, education, or household expenses in your absence.

To Pay Off Debts and Cover Final Expenses

Life insurance can also help settle debts you share with others—such as a mortgage or credit card—and pay for end-of-life costs like funeral expenses or medical bills. That financial relief can allow your loved ones to focus on grieving, not your outstanding liabilities.

To Build Wealth—Cautiously

Some permanent life insurance policies include a cash value component that accrues interest or investment gains over time. This feature allows policyholders to borrow or withdraw funds to meet long-term financial goals, from buying a home to supplementing retirement income.

However, recent tax changes—particularly those introduced under the SECURE Act 2.0 in 2023—have reshaped the rules for using life insurance as an investment. As a result, financial experts advise consulting a tax professional before leveraging a policy for wealth accumulation.

While permanent life insurance can play a role in building long-term financial security, it shouldn't replace more traditional investment strategies. Typically, the returns on life insurance-based investments lag behind those of conventional assets like stocks or retirement accounts.