My FICO logo $$$$$$$$$$$ 9876 5432 1234 5678 CREDIT CARD KELLY SMITH 11/26 My FICO logo
SCORE
Skip Navigation
  • Why FICO
  • How It Works
  • Pricing
  • Education
  • Community
  • Support
  • Member Dashboard
  • Log In Log Out
  • Start Plan
 
  • Why FICO
  • How It Works
  • Pricing
  •  
  • Education
    • Credit Education
    • Credit Scores
    • What Is a FICO Score?
    • FICO Scores vs Credit Scores
    • FICO Scores Versions
    • New FICO Scores
    • How Scores Are Calculated
    • Payment History
    • Amount of Debt
    • Length of Credit History
    • Credit Mix
    • New Credit
    • How to Improve Your Score
    • How to Build Credit
    • Credit and Financial Counseling
    • Credit Reports
    • What's in Your Report
    • Credit Bureaus
    • Inquiries
    • Errors on Your Report?
    • Blog
    • Calculators
    • Loan Savings
    • Vehicle Payments
    • How Much Can I Borrow?
    • Should I Consolidate My Credit Cards?
    • Know Your Rights
    • Identity Theft
    • FAQ
    • Glossary
  • Community
  • Support
  • Member Dashboard
  • Log In Log Out
  • Our Products
    • Ongoing Credit Monitoring Track your FICO® Score & identity
    • One-time Credit Reports Be prepared for important transactions
  • How Can We Help
    • Monitor Credit & Identity
    • Mortgages
    • Credit Cards
    • Auto Loans
  • Credit Education
  • Community
  • Support
  • Our Products
    • Ongoing Credit Monitoring Track your FICO® Score & identity
    • One-time Credit Reports Be prepared for important transactions
  • Credit Education
  • Credit Scores
    • What Is a FICO Score?
    • FICO Scores vs Credit Scores
    • FICO Score Versions
    • New FICO Scores
    • How Scores Are Calculated
    • Payment History
    • Amount of Debt
    • Length of Credit History
    • Credit Mix
    • New Credit
    • How to Improve Your Score
    • How to Build Credit
    • Credit and Financial Counseling
  • Credit Reports
    • What's in Your Report
    • Credit Bureaus
    • Inquiries
    • Errors on Your Report?
  • Blog
  • Calculators
    • Loan Savings
    • Vehicle Payments
    • How Much Can I Borrow?
    • Should I Consolidate My Credit Cards?
  • Know Your Rights
  • Identity Theft
  • FAQ
  • Glossary

Estimate your FICO® Score range

Answer 10 easy questions to get a free estimate of your FICO® Score range

Estimate for Free

Get your FICO® Score for free

90% of top lenders use FICO® Scores

Get Access Now
No credit card required
View all Personal Finance articles

Is Life Insurance Worth It?

Insurance is an important part of your financial wellness. But what about life insurance? Here's how to decide if life insurance is worth it for you.

Photo by Andrea Piacquadio on Pexels

A few months ago, I found myself in the middle of a one-on-one sales presentation for life insurance. The insurance company specialized in group insurance for union workers. And my father, who is a decades-long member of an electrical workers' union, referred me.

After sitting through the presentation, I realized that life insurance probably wasn't the right choice for me at the moment.

While insurance, alongside saving, spending, and investing, is one of the main pillars of financial well-being, insurance needs can vary dramatically depending on the person. It largely depends on your unique situation, needs, and set of circumstances. Interestingly, not having the right type or amount of insurance is a common financial blunder many folks make.

Wondering if life insurance is worth the cost? Let's walk through a few considerations to determine whether life insurance is a good fit for you:

Look at your employer benefits package

Before you shop around for life insurance, check to see if your employer offers life insurance coverage as part of your workplace benefits package. Depending on the plan, you might be able to receive either term or whole life insurance for free or a discounted group rate.

However, life insurance coverage from your employer usually maxes out at a certain number. For instance, it might cap at $200,000, or $500,000.

The cap could also be a multiplier of your salary. For instance, if you earn $50,000 at your job, and the life insurance policy has a cap of two times your salary, then your coverage amount maxes out at $100,000.

Understand the basics of life insurance

The main purpose of life insurance is to safeguard your loved ones should something happen to you. Most of the benefit is in the form of a payout to your loved ones after you pass or if you get into an accident.

A few ways you can use life insurance include:

  • Paying for funeral and burial expenses
  • Covering any outstanding debt (i.e., credit cards, car loans, mortgages, personal loans, student debt)
  • Creating another stream of income for your loved ones
  • Footing the bill for higher education expenses for your children

There are two main types of life insurance: Whole life insurance, and term life insurance. Whole life, which is also known as universal life or permanent life insurance, is designed to provide financial protection for your entire life. Term life insurance is insurance that provides financial protection for a set period and is typically anywhere from 10 to 30 years.

Note that with many life insurance accounts there's a tax benefit. In other words, it's an account that grows tax-free that you can access and borrow against over time.

Factor in your loved ones

Should something happen to you, how would that impact your spouse and dependents? A major factor to consider is how your loved ones will be impacted should you pass.

A few questions to ask yourself:

  • How much debt do you have? How would it be paid off?
  • How much do you anticipate your children and grandchildren's college expenses to be?
  • How long will you need life insurance for?
  • Do you have a mortgage? If so, what's the term?
  • Do your loved ones have other streams of income?
  • What duration of monthly payments do you feel comfortable with?
  • If you're married or in a domestic partnership, what assets does our partner own?

If you're single, life insurance might not be a good fit for you. But if you're unmarried and have dependents or aging parents who rely on you financially, you might want to consider getting a policy to provide them with a money cushion. Or it could be that you don't want someone to foot the bill to cover your funeral or burial expenses. In that case, it could also be a solid choice.

Within the realm of insurance talk, the general rule of thumb is that you should have at least seven to ten times the amount of your annual salary. So, if your yearly income is $60,000, you should aim to have a life insurance policy that covers $420,000 to $600,000.

Shop around

Now that you know the right questions to ask and if you think a life insurance policy is worth it for you, do your homework and rate shop by gathering a few quotes. When gathering your quotes, make sure the coverage amounts, deductibles and premiums are roughly the same. Here's what you'll want to check:

  • Coverage
  • Deductible
  • What the tax benefits are
  • If you can borrow money against the account
  • If you need any add-ons to your policy (AKA riders)
  • If there's flexibility in your premium
  • Cost of your premium (The cost hinges on a handful of factors: Your coverage, age, gender, medical history, hobbies, lifestyle, and your deductible. Generally, the younger and healthier you are, the less expensive your premium.)

When researching companies, make sure to also look up reviews and see what policyholders have to say about the insurer's customer service, and ease of filing claims.

Life insurance certainly isn't for everyone. In some cases, you might be better off squirreling away funds into a savings account and focusing on growing your retirement funds. However, it could be the right choice for some. It's important to understand whether it's right for you and the ins and outs of how it works.

Get your FICO® Score from FICO, for free. No credit card required.

Image of Jackie Lam

Jackie Lam

Jackie Lam is a personal finance writer whose work has appeared in Salon, Business Insider, and GOOD.

Estimate your FICO® Score range

Answer 10 easy questions to get a free estimate of your FICO® Score range

Estimate for Free

Get your FICO® Score for free

90% of top lenders use FICO® Scores

Get Access Now
No credit card required

Page footer

Products

  • Home
  • Why FICO
  • How It Works
  • Pricing

Learn

  • Education
  • Community
  • Support
  • Blog

Company

  • About Us
  • Terms of Use
  • Cookie Preferences
  • Privacy Policy
  • Affiliate Program
  • Accessibility

Get Our App

  • Download iOS app on the App Store
  • fil_get
    Get Android app on the Google Play Store

Follow Us

  • Twitter
  • Facebook
  • Instagram

Credit Education

  • Credit scores
  • What is a FICO Score?
  • FICO Score versions
  • How scores are calculated
  • Payment history
  • Amount of debt
  • Length of credit history
  • Credit mix
  • New credit
  • Credit reports
  • What's in your report
  • Bureaus
  • Inquiries
  • Errors on your report?
  • Calculators
  • Know your rights
  • Identity theft
  • FAQ
  • Glossary

Copyright ©2001- Fair Isaac Corporation. All rights reserved.

IMPORTANT INFORMATION:

All FICO® Score products made available on myFICO.com include a FICO® Score 8, and may include additional FICO® Score versions. Your lender or insurer may use a different FICO® Score than the versions you receive from myFICO, or another type of credit score altogether. Learn more

FICO, myFICO, Score Watch, The score lenders use, and The Score That Matters are trademarks or registered trademarks of Fair Isaac Corporation. Equifax Credit Report is a trademark of Equifax, Inc. and its affiliated companies. Many factors affect your FICO Scores and the interest rates you may receive. Fair Isaac is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. Fair Isaac does not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating. FTC's website on credit.