Time and time again I encounter tragic stories—or GoFundMe campaigns—because someone didn’t have life insurance. Their death leaves a family with mounting bills, little or no savings, and an uncertain future.
Note: Before you leave this page thinking life insurance is unaffordable, many people can find coverage for around $25 a month. Affordable options do exist.
Whenever I read these stories, I wish families better understood how life insurance works: how affordable it can be and how much coverage they might need.
Talking about life insurance means confronting what happens when you or a loved one dies, which isn’t easy. Still, understanding why you need life insurance is important. Proper coverage can protect your family financially when they need it most.
According to data highlighted during Life Insurance Awareness Month (September 2017), about half of U.S. adults don’t carry life insurance. Those who do often have far less coverage than necessary—on average only about $168,000.
Many people rely solely on the small benefit provided by an employer, if any at all. To truly protect your family, you usually need more coverage than an employer plan offers.
So, what is life insurance?
Life insurance provides a cash benefit to your family when you die. If you are the primary earner, many people depend on your income. Life insurance proceeds can cover funeral expenses, day-to-day bills, outstanding debts, mortgage payments, college costs, and more.
Consider this: if you were gone tomorrow, how would your family pay the household bills? That question captures the main reason to carry life insurance.
The primary purpose of life insurance is to help loved ones and dependents maintain financial stability so they can grieve without the added stress of immediate money problems. There are additional reasons to carry a policy beyond this core purpose.
When shopping for coverage, many providers offer calculators to estimate the right amount for your situation. These tools remove guesswork by considering your age, dependents, debts, income, and savings. After determining a target coverage amount, you can compare quotes from top-rated insurers to find the best rate.
How much does life insurance cost?
Cost is one of the biggest misconceptions about life insurance. Many assume it will be expensive, but for many people term coverage can be surprisingly affordable. Policies offering $1,000,000 in coverage can often be found for around $50 per month or even closer to $25 per month for some applicants, depending on age and health.
$25 a month is likely less than many recurring monthly expenses such as internet or streaming subscriptions. If needed, a few small budget adjustments can make coverage fit more comfortably.
Keep in mind that the lower price point typically refers to term life insurance. There are two main types of life insurance:
Term Life Insurance covers you for a specified number of years—often 10, 20, or 30—and is generally the most affordable option. It protects your family during your working years, when income replacement matters most. Term policies pay a death benefit if the insured dies during the term; they do not build cash value. For many young families and working adults, term coverage provides the best balance of protection and cost.
Whole Life Insurance provides lifelong coverage and is usually more expensive. Whole life policies often build cash value over time and can include investment-like features, which increases the premium. For households that need permanent coverage—such as a dependent who will require lifelong care—whole life can make sense, but it is a different financial product with higher costs.
Who needs life insurance?
Not everyone needs life insurance, but many people do.
If you are single, debt-free, and have no dependents, you may be able to forgo a policy. However, life insurance can still be important in other situations. If you have debts with co-signers—student loans, car loans, a mortgage—life insurance can prevent those obligations from falling on someone else.
I once read a heartbreaking true story: a young adult died without coverage and left student loans to parents who had co-signed. Their monthly payment burden nearly doubled, costing them thousands each month. That’s exactly the kind of avoidable hardship life insurance can prevent.
If anyone depends on you—spouse, children, elderly parents—you should strongly consider life insurance. It ensures they can maintain their lifestyle and meet financial obligations if you’re no longer there to provide income.
Is life insurance a waste of money?
Some people claim life insurance is a waste of money, but for many families that view is misguided. Accumulating a large sum of savings to replace a primary earner’s income, pay off debts, and cover major expenses is difficult for most households—even for many higher earners. Investments can grow wealth over time, but they usually won’t provide an immediate lump sum large enough to replace an income or settle significant debts the moment you die.
A life insurance policy gives your beneficiaries access to a substantial death benefit immediately after the claim is paid, giving them the financial breathing room to grieve and manage affairs without an immediate cash crisis.
4 Reasons You Need Life Insurance
1. Do you have a family?
If a spouse or children depend on your income, life insurance is essential. It helps cover day-to-day expenses, pay off debts, and maintain housing stability. While some obligations like certain medical bills may not transfer, much consumer debt—credit cards, loans, and some private student loans—can become the responsibility of survivors or co-signers unless it’s covered by insurance.
Life insurance proceeds can also help fund future needs like your children’s education or paying off the mortgage, allowing your family to maintain financial stability after a loss.
2. Has anyone co-signed a loan for you?
If someone co-signed a loan—whether for a car, student loans, or a mortgage—you should have life insurance. Without it, the co-signer could be left legally responsible for the remaining debt. Carrying a policy is a responsible way to prevent burdening friends or family with debt after you’re gone.
3. Are you young and healthy?
Young, healthy applicants typically qualify for lower premiums. This is a good time to lock in affordable coverage that can protect your future family and dependents. Many people procrastinate because they feel invincible, but purchasing coverage while you’re healthy can save money over the long term. If you plan to start a family one day, securing a policy now is a prudent step.
4. Do you know how much a funeral costs?
The average funeral cost ranges roughly from $7,000 to $10,000. Without life insurance, funeral expenses can fall to surviving family members who may already be under financial strain. A life insurance benefit can cover these immediate costs so loved ones aren’t forced to pay thousands out of pocket during an already difficult time.
Thinking about life insurance isn’t pleasant, but it’s an act of care and responsibility. Protecting your family financially ensures they can grieve without added monetary worry.
Do you have life insurance? Why or why not? If you do, how much do you pay annually?