Do You Need Life Insurance & Is It Worth It?

We are well acquainted with doing annoying things for our kids.

Driving to swim meets? Check. Using vacation time on random teacher’s workdays? Check. Oh, and that time our first grader had to bring in 100 of something—guess how capable a 6-year-old is of collecting 100 pennies or 100 lollipops without parental involvement? But we do it because we love them, and they’re our responsibility.

Enter a parental chore you’ve probably heard a lot about: life insurance. You might ask yourself, "Do I need life insurance?" or "How do I know if I need life insurance?"

It depends, but the more responsibilities in your life, the stronger chance that a policy could be right for you. (For example, here are some ways to stay on top of your finances at each stage of life.)

What Is Life Insurance?

Life insurance is an agreement between you and an insurance company that says that, if you were to pass away, the insurer would pay a "death benefit" to beneficiaries of your choosing, as long as your premiums are paid and your policy is in good standing. In many cases, people designate their spouse or children as beneficiaries. That way, if something were to happen to them, the death benefit could help provide money loved ones could use to make ends meet.

Is Life Insurance Worth It?

While a lot of people can benefit from having a life insurance policy, not everyone needs one. Some major life and financial milestones, like raising a family or saving for retirement, can guide your decision about what kind of protection you might need. (For example, here are some special considerations single parents may keep in mind about life insurance.)

Here's more on how that breaks down.

Do You Need Life Insurance?

Who needs life insurance? When is life insurance necessary? Well, that depends on a number of factors.

Do you have kids or other financial dependents?

In thinking about who needs life insurance, children play a big role. When you have a baby, you sign on for at least 18 years of kid-related bills. Sorry to break it to you, but diapers and daycare bills with an infant are only the beginning. Everyday costs like clothes, extracurricular fees and (of course) college can add up to some serious cash. Life insurance can help your family make ends meet even if you or your spouse passes away.

If you’re childfree for now but planning on babies in the future, it might be worth considering getting life insurance before starting a family, since it generally tends to be cheaper the younger and healthier you are.

Does your spouse or partner depend on your income?

If there's a significant income gap between you and your partner, or if one of you is a stay-at-home parent without an income stream, then life insurance may be worth considering.

Ask yourself whether your partner would be able to maintain the same standard of living without your income. Would they need to move to a different house or apartment? Would they need to get a job in a very quick hurry in order to make ends meet? If so, life insurance might be a way to provide a cushion to reduce the stress on your spouse.

Do you have a mortgage or other debts?

Besides kids, debt is another important financial factor to take into account when you’re thinking about if life insurance is worthwhile. Owning a home (and paying off a mortgage) is one of the biggest sources of debt for most people. Unlike some student loans, mortgage debt won’t disappear if you die (cosigned loans won’t go away, either, so keep that in mind when you’re adding up debt).

If you and your spouse share debt, you should have a plan so neither one of you gets stuck with too much to handle alone should the worst case happen.

Do you expect your heirs to face estate taxes?

If your family will need to pay estate tax, a life insurance policy could help offset those costs. Of course, this is irrelevant unless you have a very large estate. In 2025, you don't have to worry about federal estate tax until your assets exceed $13.99 million.

Would your funeral be a big financial burden?

If you think your surviving family members would struggle to cover the cost of your final expenses, then life insurance could help fill that gap. Standard funerals can easily cost $8,000 or more.

Do you own a business that would fail without you?

If you have co-founders of your business or employees whom you want to watch out for in your absence, you might consider a life insurance policy to help provide them with a buffer if something were to happen to you.

Are you keen on avoiding probate?

Probate is the process through which courts decide that your will is legally valid and oversees its execution. This can take months or possibly even years in some cases, so if you want to make sure your family receives some financial assistance ASAP, life insurance could be one option. That's because life insurance generally doesn't go through probate when a beneficiary is named, so the funds will likely be available sooner than assets that do go through the process.

Do you have robust savings?

While there’s no exact number that guarantees a comfortable retirement, common advice often suggests saving at least $1 million, or 10 to 12 times your annual income. Life insurance can be a way to help protect your family’s long-term financial future if they can’t count on your 401(k) to cover everything you need.

If something happened to either you or your partner, the surviving spouse may face financial struggles in retirement, on top of the loss of not growing old together. This isn’t to say that you should buy a life insurance policy instead of saving for retirement! Your best plan is to save in retirement accounts like 401(k)s or IRAs throughout your working life.

But if your or your spouse’s early death might cut those retirement savings short, a term life insurance payout can help replace what you’d planned to save over the course of your career.

If you’re financially self-sufficient, your life insurance needs are less about a contingency plan for retirement and other expenses.

One important exception is people with estates worth more than $13.99 million. You’re subject to estate tax when you own that much (and in some states, you can be subject to state estate tax or inheritance tax at lower values, so check your applicable state law). If your assets aren’t easy to convert into cash (like a ranch or other property your family wouldn’t want to sell), a life insurance benefit can cover estate tax obligations and save your family from the headache and heartache of selling property they wouldn’t want to part with.

It’s worth noting that life insurance benefits generally aren’t taxable.

How to Use Life Insurance

Most of the time, people turn to life insurance to help provide financial security for their loved ones. If you pass away, the death benefit can pay for things your income would have covered.

Life insurance tends to fall into two large categories: term and whole life insurance. Term life insurance tends to be great as an income replacement if someone were to pass away. As indicated by the name, term life policies have a set period (or term). If the insured person were to pass away during this period, the life insurance policy pays the beneficiary.

On the other hand, a whole life policy doesn't have a set time frame. As such, regardless of when someone passes their policy would be active (assuming all requirements have been met such as paying the whole life insurance premium).

Premiums for term life insurance are generally lower than most other forms of life insurance. You can choose a term that aligns with other goals, like paying off your mortgage, so you’re not paying for coverage many years after you no longer need it.

Whole life insurance policies tend to be more expensive than term life. That’s because in addition to providing permanent coverage (so long as premium payments are up to date), these policies can build cash value over time. This is why whole life is also called permanent life.

So, regardless of when you pass, with whole life insurance a death benefit will be paid so long as the policy is in-force. If your policy has built cash value, you may be able to access these funds via withdrawals and loans during your lifetime. Sometimes the cash value can be used to make premium payments as well.

Keep in mind that using any cash value for a loan or withdrawal can reduce any available death benefit, and can also cause the whole life policy to lapse if you’re using the cash value to make premium payments. You might want to speak with a financial

professional or an insurance agent who sells various forms of life insurance in order to help you decide if a permanent life insurance policy is right for you.

Life Insurance Without a Steady Paycheck

Your family may depend on you financially even if you’re not a traditional “breadwinner” in a 9-to-5 role. It’s usually best to insure both you and your partner, even if only one of you works outside the home.

One parent may plan to stay home for a few years after a baby but know what job (and rough salary) to expect when they return to the workforce. Other times, one partner may have been out of the workforce long enough that they aren’t sure what it would look like to job-hunt again.

Life insurance coverage on the employed spouse needs to account for the possibility that the non-employed spouse might have to restart a career from a low-paying stage. So, instead of computing coverage for a non-working or stay-at-home spouse based on salaries, you might calculate instead how much it would cost to replace the vital tasks they do at home, like childcare or other services a single parent might need.

Ultimately, it makes sense for many families to choose a coverage amount based on their needs, like bills and debts, rather than tying coverage to a strict multiplication of a salary.

Is Age a Big Factor in Who Needs Life Insurance?

At the end of the day, your life insurance needs will likely be dictated by what's best for your family. Nonetheless, age does play a role in determining how much a life insurance policy might cost. As a general rule, life insurance gets more expensive as you age.

Nonetheless, some types of policies tend to be more affordable, such as term life insurance. In many cases, your greatest period of need will be determined by your family situation. For example, if you have young children and want to make sure they're provided for until they hit college age, then you might choose a term length to cover your family for that time. Presumably, if you're above a certain age, there's also a good chance that your financial obligations might be reduced, as well.

Do I Need Life Insurance if I Don't Have Dependents?

Just because you don't have kids or other clear financial dependents like aging parents, that doesn't mean that no one is affected by your finances. Here are a few reasons life insurance may make sense even if you aren't a parent or caregiver:

• Covering final medical expenses: If you're nervous that you could become ill at the end of your life and incur large medical bills not covered by health insurance, then a life insurance policy could help defray those costs after your death.

• Paying for funeral costs: Similarly, if your family would struggle to pay for your funeral and other expenses, life insurance could help make them less of a burden.

• Reducing pressure for debt co-signers: If someone has co-signed debt with you, such as a parent co-signing on your student loans, then that person will still be on the hook for the debt after you're gone. That's true of a co-signed mortgage and other loans, too. Life insurance could help pay off those balances.

Do I Need Life Insurance on My Children?

In many cases, it may not make financial sense to take out a life insurance policy on your children. Some people do consider purchasing a policy for their child to guarantee insurability.

What About Life Insurance Through Work?

Although many jobs offer life insurance as an employee benefit, there are several reasons you might want to consider an individual policy for yourself, independent of your job. First, life insurance through work is often not enough since coverage amounts tend to be lower.

Additionally, you may not be able to take your policy with you when you switch jobs. Or, if you do, it may be significantly more expensive. In the meantime, if you've waited before getting an individual policy, rates may be higher when you're ready, since premiums rise as you age.

What Does Life Insurance Cost?

People who are most likely to need life insurance often have a lot going on financially already. Young families who are trying to balance college funds, retirement savings, student loan payments, down payment savings and daycare (and maybe a well- deserved vacation) may feel discouraged at the idea of tacking on another bill after paying their other living expenses.

Fortunately, life insurance doesn’t need to set you back thousands of dollars. Term life insurance, which offers coverage for a set period of time (usually 10 to 30 years) tends to be relatively inexpensive.

When you apply for life insurance, you’ll submit information about your age, gender and lifestyle (skydiving instructors may pay more than people without risky hobbies).

Some online companies offering term insurance may be able to approve your application right away; in other cases, you might need to get a medical screening and have underwriters review your life insurance application before they can decide if an offer for coverage can be made. Based on your age, health, tobacco use and other risk factors, they’ll make a decision on if an offer can be made. If so, they’ll give you a rating that determines what you’ll pay in premiums.

A nonsmoking, 30-year-old Iowa woman in excellent health who wants a $500,000, 20- year term life insurance policy may pay an estimated $19.86 per month for her policy (this is the best rate class offered by Fabric, quote accessed May 2025). If she applies when she’s 35 and in “good” versus excellent health, she may pay an estimated $26.72 per month.

Depending on your individual situation, you might want to double-check your current habits and make any adjustments so your health (and chances at a preferred life insurance rate class) are in tip-top shape.

Factors to Consider When Choosing Life Insurance

Everyone's got a different personal situation, and as a result they may have different life insurance needs. Still, some things to consider include:

• The cost of the premiums

• The length of the term you're looking for

• Requirements for applying (life insurance applications will ask you for different information, ranging from your health situation to your employment status and whether you love high-adrenaline hobbies)

• Whether or not you're willing to take a health exam, or if you're looking for a no-exam life insurance policy

• Policy turnaround time—the underwriting process can take weeks, but some companies (such as Fabric) have the ability to let many applicants know immediately if they've been approved

Life insurance isn’t necessary for everyone, but most people who combine their financial life with others—in other words, almost anyone with a family—can probably benefit from at least considering it. Better yet, this “adulting” task is probably easier to fit into your schedule and budget for than you’d expect.

Fabric exists to help young families master their money. Our articles abide by strict editorial standards.

Information provided is general and educational in nature, is not financial advice, and all products or services discussed may not be offered by Fabric by Gerber Life  (“the Company”). The information is not intended to be, and should not be construed as, legal or tax advice. The Company does not provide legal or tax advice. Consult an attorney or tax advisor regarding your specific legal or tax situation. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. The Company makes no warranties with regard to the information or results obtained by its use. The Company disclaims any liability arising out of your use of, or reliance on, the information. The views and opinions of third-party content providers are solely those of the author and not Fabric by Gerber Life.