Top Advantages and Disadvantages of Life Insurance

When you buy life insurance, you’re hoping you won’t ever have to use it. Life insurance coverage is the financial protection your loved ones receive in the event of your death. If do own a policy and you die (having paid your premiums on time), your beneficiaries receive a payout called a death benefit that’ll replace any income you provided in life.

Life insurance is about making sure the people you love most are looked after financially, should the worst happen. It could mean your family keeps the home they’ve grown up in, even if you’re not around to help with the expense.

Life insurance can fulfill many needs. One of the primary needs is to protect the financial well-being of your survivors by maintaining their current lifestyle in the event of your death. Life insurance provides a tax-free lump-sum death benefit, which can be invested to provide income for a spouse or dependent children. Portions of a death benefit can be used to pay off debts and eliminate the need for survivors to continue to meet repayment schedules.

Advantages to buying life insurance


Financial protection for your family

The most obvious advantage of life insurance is also its functional purpose. Life insurance is essentially the exchange of a relatively small payment each month for a very large amount of money if you die. The death benefit should be so high as to cover living expenses such as a mortgage, your kids’ college tuition, and provide a favorable financial cushion, and you can get all that covered for the cost of about six lattes a month.

This is especially advantageous the more your loved ones rely on your income for their expenses. You want to make sure they don’t have to suffer financially if you die, and life insurance is the cheapest way to do that.

Life insurance is cheap enough to fit any budget

Depending on how much coverage you need, you may be paying as little as $30 per month in life insurance premiums. If you don’t have a lot of dependents or your beneficiaries won’t need that much financial protection if you die, then you can easily benefit from less coverage and even lower premiums.

That’s especially true for term life insurance, which is meant to cover you while you have the most expenses (mortgage payments, children, business partnerships, etc.) and to expire when you have fewer ones. During that time, if you purchased life insurance coverage early enough, you could save hundreds of dollars each year compared to buying coverage later in life.

In that sense, you pay only for what coverage you and your family require. Our life insurance calculator can give you a tailored recommendation for how much coverage you need.

Peace of mind

If you don’t die while the policy is in effect, it may seem like all those premium payments were for nothing. But they weren’t for nothing – you were paying for protection in the event that you die, something which could happen even this very second if you have a family history of brain aneurysms or live in a war zone. You’re paying for the peace of mind that comes with knowing that you can help your family from beyond the grave in the same way you helped them while alive. You can’t put a price on that.

It’s easier than ever to apply for life insurance

Policygenius makes it easy to compare life insurance online. In just about 10 minutes, you can get free quotes from many different life insurance carriers, and choose the one that fits your needs from there. The days of having to meet with an agent and hear a spiel are over.

You can even apply online. Get your documentation together and fill out the application; you can do the whole thing during over a couple commercial breaks while you’re watching “The Good Place.” If you need help, you can reach out to one of our experts.

Complete your financial plan

A lot of people save for their retirement: buy an asset you can sell for a profit later; invest in an individual retirement account or a 401(k) plan; sock some money in away in an interest-bearing savings account. You want to protect yourself financially when you reach old age, and the best way to do that is to start saving yesterday.

Buying life insurance should be part of that financial plan. That’s because a lot of those tactics won’t bear fruit until you’re much older. If you die before then, but you have people who rely on you financially, your retirement accounts are not going to be of much use to them.

Think of life insurance as a financial bridge to your retirement. If you outlive the term, then great! – cash out the money you’ve been saving and enjoy your retirement. If you die before then, at least your loved ones won’t suffer.

Disadvantages of Life Insurance

Opportunity Cost

Currently, life insurance is seen as a luxury in the market, which means that we constantly think about what we could be spending the money on elsewhere. If we didn’t have to pay premiums (which we legally don’t), we wonder where the extra money could go.

Eventually, we think about it so much that we end up forgetting all about life insurance.

To this, we have one thing to say – will your loved ones forget about the decision if you were to pass away? Despite the devastating impact that no life insurance has on loved ones, we continue to leave them behind with a struggle on their hands.

With life insurance, there shouldn’t be an opportunity cost because you are spending money on keeping your family protected. With a life insurance policy, you are ensuring that your family can pay bills, your children can go to school, your partner can pay the mortgage, etc. Surely there isn’t too many expenditures as important as this one?

Stuck in Limbo

For young people, the topic can be rather tricky and many will not take the plunge because they have too many questions.

If you choose whole life insurance at a young age, the premiums will be much higher than a term life policy. However, the advantage is that you can choose a policy that is paid up in 10 years and you will never have to make another premium.Further, as you age, term life premiums go up.

If you were to go for a term life policy, you will have to pay more in the future when the policy expires because you will be older and there is always a risk of having medical conditions and being placed into the high risk life insurance category.

Therefore, the younger generations are caught halfway between the benefits and drawbacks of both types of policies, term and permanent.

This being said, there are now solutions on the market which could prove useful.

Not Necessary

If you have no dependents or have money saved up for your final expenses and burial costs with no other debts, life insurance isn’t necessarily a must.

If you have a partner and children who rely on your income, then life insurance becomes very important for everyone involved.

It may surprise you to learn that although student loans are forgivable upon death, the forgiven portion is still attributable as income to your estate in the year you died. So if your $100,000 debt is forgiven, you, or your co-signor, may still be on the hook in the form of income tax on the forgiven amount.
Protect Your Future Insurability

Securing life insurance while you are young has several advantages. One is the cost is lower, since age is a primary factor when determining life insurance rates.

Another advantage to life insurance while you are young is that you protect your future insurability. If you develop some disease or illness, it could prevent you from getting coverage later in life, or make the coverage too expensive.

You should also consider the value of a properly designed permanent life insurance policy that builds cash value over your entire life. Anyone who gets permanent coverage later in life sees the value of the policy and most wish they had got some coverage earlier in life so the policy had longer to grow and develop. The longer you have a whole life policy, the more efficient and effective it becomes.


We know that the life insurance market can be a tricky one to understand. As a result, the majority of people seem to forget about it all together – if you do this, you can’t benefit from everything we saw previously.

Lack of Trust

Finally, there are also people who lack the trust in the huge corporations and they don’t want to give money away to a company that could collapse at any moment.

For example, if there was a major financial collapse like the one we saw in 2008, would the company be able to survive and keep your policy going? Of all the concerns, this is one of the largest and it is fair. However, it isn’t quite justified.

As long as you choose a company that has a strong financial rating and outlook for the future, you can be confident that your policy will be safe.

When we say ‘large insurance companies’, this is actually a bit of an understatement because they place billions of dollars of life insurance in force every single year.

Nowadays, there is no need to worry about the legitimacy of life insurance companies as long as you choose one that is financially secure.


life insurance