When should you get life insurance?

This content has been reviewed and edited by an Investment Advisor Representative working for Global Predictions, an SEC-registered Investment Advisor.

Let’s face it—thinking about life insurance might not be the most exciting thing to tackle, but it’s worth considering if it could help protect the people you care about. Life insurance can be a powerful financial tool, but only if it truly fits your unique circumstances. Not everyone needs it, and the decision should always come down to your specific goals and responsibilities. We’re not here to sell you anything—just to give you the facts so you can make a fully informed decision without being pressured by sales tactics. Online comparison tools are your best ally when evaluating policies—they let you focus on what truly matters: your needs and budget.

Key Takeaways

• Life insurance is most valuable when you have dependents or others who rely on your income. It acts as a financial safety net to ensure their needs are met if the unexpected happens. For example, if your income covers rent, daycare, or daily living expenses, a policy could help your loved ones avoid serious financial hardship.
• Not every policy is worth the cost. Many policies come with hidden fees or unnecessary complexity, especially permanent ones. Take time to compare your options using online tools instead of relying solely on an insurance salesperson.
• Term life insurance is often the better choice for most people. Permanent policies are usually more expensive and may not deliver the value they promise, especially if sold using fear-based tactics like “leaving a legacy” or “what if you can’t renew later?”
• Major life milestones—like marriage, buying a home, or having children—are key moments to consider life insurance, but only if those events create financial risks for your loved ones (in the event of your passing).
• Life insurance can play a role in financial planning, like covering estate taxes or leaving a legacy, but there are often more effective ways to achieve these goals, such as trusts or investments.

Why Timing Matters

Life insurance is most relevant when you have dependents or others who rely on your income. Without it, your family could face significant challenges, such as needing to sell the family home or making hard trade-offs for your children’s education to cover living costs. However, if your kids are grown, your debts are minimal, and your spouse is financially independent, you may not need a policy at all.

Let’s break down the timing based on common life events:

Getting Married

Marriage often brings shared financial responsibilities. If your income helps cover a mortgage or other shared expenses, life insurance can provide peace of mind that your spouse won’t be left in a difficult financial position if you pass away. However, if your spouse is financially independent, a policy might not add much value.

Hypothetical Example: If you and your partner take out a mortgage together, a term life policy can cover the remaining balance if one of you passes away unexpectedly, ensuring your partner isn’t forced to sell the home.

Having Children

Becoming a parent is one of the most common reasons people buy life insurance. It ensures your children’s financial needs are met, including daycare, education, and other living expenses. Note: if you’ve already built a significant financial safety net, a policy may not be necessary.

Hypothetical Scenario: Maria, a 35-year-old mother, takes out a $500,000 term policy to ensure her children’s college tuition and daily needs are covered in her absence.

Buying a Home

A mortgage is one of the largest financial commitments you’ll make. Life insurance can help protect your family from losing their home if something happens to you. However, if you have sufficient savings or other assets to cover the mortgage, a policy specifically for this purpose might not be needed.

Hypothetical Example: John and Lisa, new homeowners, take out a term policy matching the length and amount of their mortgage to safeguard their investment.

Planning for Retirement

As you approach retirement, life insurance may still have a role in specific situations, such as providing for a dependent spouse, elderly parents, covering estate taxes, or leaving a legacy. However, if your children are financially independent, your mortgage is paid off, and your retirement savings are robust, you likely no longer need a policy.

Hypothetical Example: A permanent life insurance policy can supplement retirement savings, but this approach often involves high fees and complexities that might not justify the cost. Alternatives like diversified investments are often more effective.

Term vs. Permanent Life Insurance: What You Should Know

Term Life Insurance: The Practical Choice

Term life insurance is affordable, straightforward, and designed to provide coverage for a specific period—like 10, 20, or 30 years. By the time your term ends, your goal is to have built enough financial independence or for your dependents to no longer rely on your income.

Key Insight: The common sales pitch that “You won’t be able to renew later” is often misleading. If you’ve planned properly, you likely won’t need a policy once your term ends. Don’t let fear-based tactics pressure you into a more expensive policy.

Permanent Life Insurance: Be Critical

Permanent policies, like whole life or universal life, offer lifetime coverage but come with significantly higher premiums and often unnecessary complexities. These policies are frequently sold with promises of “leaving a legacy” or “building cash value,” but the fees often outweigh the benefits. For most people, there are better ways to achieve these goals.

Hypothetical Cost Comparison: Over 30 years, a term policy costing $25/month totals $9,000. In contrast, a whole life policy at $200/month would cost $72,000—money that could be growing in investments instead.

What You Should Know: Borrowing against a permanent policy’s cash value might sound appealing, but unpaid loans reduce the death benefit, leaving your beneficiaries with less. For financial planning, alternatives like trusts or diversified investments are often more effective and transparent.

Common Mistakes People Make

• Trusting a Single Salesperson: Insurance agents are often incentivized to sell expensive policies that may not align with your actual needs. Always get multiple opinions and use online tools to compare options side by side.
• Not Comparing Policies Online: Skipping comparison tools means missing out on better and more affordable options. Take time to evaluate fees, coverage, and terms for the best fit.
• Relying Solely on Employer Coverage: Employer-provided insurance is convenient but often insufficient and doesn’t transfer if you change jobs.
• Skipping Policy Reviews: Life events like marriage, children, or a new home mean your coverage needs may change. Regular reviews help keep things on track.

Solution: Set a calendar reminder to revisit your policy annually and compare your options using trusted resources.

FAQs

How much life insurance coverage do I need?

A common guideline is 10–15 times your annual income, but your specific needs depend on factors like debts, living expenses, and future goals.

Is it too late to get life insurance after 50?

No, but premiums will be higher. Policies like Guaranteed Issue Life Insurance might be an option if health is a concern.

Can I change my coverage later?

Many policies allow adjustments, especially if your needs or financial situation change over time (often at a different rate).