Your needs are different from someone else's, but it's good to start with a rule of thumb:

If people rely on you to provide for them, then yes, you probably need life insurance.

How does life insurance fit into a financial plan?

The primary purpose of life insurance is to protect - against the personal and financial strain of an unexpected death.
However, life insurance comes in many forms and can accomplish other, more complex, goals too.

Term insurance is the simplest type. It is temporary and covers you in case of death for a specified period of time. Like all life insurance, it pays a cash benefit to your beneficiary, tax-free. Term insurance is most useful serving a temporary need, such as when debt loads are high. It is initially the most affordable insurance but the cost will increase as you age. If you want long-term coverage, a permanent insurance solution may be a better choice.

Permanent insurance is just that - permanent. It keeps you covered as long as you live. Over the long term, it could be less expensive than term insurance. Permanent insurance is a good foundation for your financial plan because it will carry you through your entire life. From this foundation you can build your plan by adding health protection and savings programs.

Universal life insurance is a unique design - it provides a tax-free death benefit plus the option to invest and earn tax-deferred interest.

Deposits to the policy fund can be used for :

  • funding the insurance portion or
  • investing, or
  • both of the above

Universal Life policies are also used as a sophisticated financial planning tool for people with significant disposable income.