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

January marks Financial Wellness Month, making it a great opportunity to evaluate the health of your overall financial plan. One area many people overlook—often until much later in life—is life insurance. Even though it’s commonly associated with older adults or new parents, life insurance can play an important role in strengthening your financial stability today and for years to come.

Life insurance offers protection for the people you care about most, provides a buffer against unexpected events, and in certain cases, can even support some of your personal financial goals while you’re still here to enjoy them. Below, we’ll walk through the fundamentals, the major types of coverage, and how to ensure your policy continues to align with the life you live.

How Life Insurance Works Behind the Scenes

At its simplest, life insurance is a contract that provides a payout—called a death benefit—to the beneficiaries you name if you pass away. That money can help your loved ones manage significant expenses like housing costs, medical bills, personal debts, childcare, funeral expenses, or day‑to‑day household needs.

In essence, life insurance helps keep your family’s financial plans on track even when life takes an unexpected turn. It supplies immediate liquidity at a time when it’s most needed, helping ease the pressure of a difficult situation.

You keep your coverage active by paying premiums on a regular basis. In exchange, the insurance company guarantees the payout according to the terms of the policy. That promise—knowing your family has a safety net—is one of the reasons life insurance is so often considered a foundation of financial wellness.

Term vs. Permanent Life Insurance: What’s the Difference?

There are two main categories of life insurance, and each serves a different purpose depending on your goals and stage of life: term and permanent.

Term life insurance provides protection for a set number of years—most commonly 10, 20, or 30. If something happens to you during that window, the policy pays the death benefit to your beneficiaries. If you outlive the term, the coverage simply ends. This type of insurance is typically the most affordable and is often a good fit for people who want financial protection during their highest‑responsibility years, such as while raising children or paying off a home.

Permanent life insurance, as the name suggests, lasts your entire lifetime as long as your premiums are paid. It includes a cash value component that slowly grows over time. Depending on the policy, you may be able to borrow or withdraw from this cash value while you’re still alive—though doing so can reduce the final payout to your beneficiaries.

Two common types of permanent life insurance include:

• Whole life insurance: This option features predictable premiums, steady cash value accumulation, and a guaranteed death benefit. It’s known for being structured and reliable.
• Universal life insurance: This version offers more flexibility. You can adjust your premium payments and your death benefit, and your cash value may grow based on market conditions. That flexibility can provide more control, but it may also introduce some risk.

Both types of permanent insurance can be helpful if you want lifelong protection or prefer a policy that offers a savings component alongside coverage.

Should You Consider the Cash Value Feature?

The cash value portion of permanent life insurance is often viewed as an added bonus. Over many years, it can become a resource you might use for big expenses like education costs, medical needs, or even certain retirement goals.

However, it’s important to understand how it works. Cash value typically builds slowly, and pulling from it—whether through a loan or withdrawal—may reduce what your family ultimately receives. Permanent policies are also more expensive than term insurance, so they may not be the right fit for every budget.

If you already know you want lifelong coverage or like the idea of fixed premiums, the cash value feature may add meaningful long‑term benefits. Just keep in mind that most people should fully fund their other savings and retirement accounts before relying on a life insurance policy as an investment tool.

Riders That Personalize Your Policy

No two families are exactly alike, and your life insurance doesn’t have to be either. Policy add‑ons—called riders—allow you to customize your coverage to match your personal circumstances.

For instance, a long‑term care rider can help pay for ongoing assistance if a serious illness or injury leaves you unable to care for yourself. A terminal illness rider lets you access part of your death benefit early if you receive a qualifying diagnosis. For term policies, a return‑of‑premium rider may refund the premiums you paid if you outlive the policy term.

Certain term policies also allow you to convert to permanent coverage later without taking a new medical exam. That flexibility can be especially valuable if your health changes but you still want long‑term protection.

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

Simple Ways to Keep Your Policy Up to Date

Life insurance is most effective when it reflects your current needs. A few routine habits can help ensure your protection stays in step with your life:

• Review your beneficiaries annually. Make sure the right individuals are listed, especially after events like marriage, divorce, or welcoming a new child.
• Make sure your coverage amount still fits. If your income, debts, or household responsibilities have changed, your policy may need an update.
• If you have term insurance, check for conversion options. Converting to permanent coverage without additional medical exams can be useful if your health shifts over time.
• Do a yearly policy check‑in. Just like reviewing your budget or savings plan, a quick look at your life insurance can help keep everything running smoothly.

Whether you’re evaluating an existing policy or thinking about new coverage, we’re here to help you make sense of your options and protect the people who matter most.