Just because we express a desire to do something, doesn’t mean we’ll do it.
Insurance is a great example of this. A recent study on life insurance statistics showed that 42% of Americans report feeling that they need more life insurance coverage.* At the same time, the percentage of families with life insurance is decreasing—currently only 51% say they own a life insurance policy.
One reason for this shift could be that people have misconceptions about the cost of life insurance. In fact, approximately 72% of Americans overestimate the cost of term life insurance.* This is an unfortunate misconception, as life insurance is a valuable tool to protect you and your loved ones. It can also be used as a retirement and college savings planning vehicle.
In this article, we’ll go over the value of life insurance and when you should purchase a new policy or update existing policies.
Looking at Your Life Insurance Program
A professional can help you determine whether term or permanent life insurance could be a good fit for you. People who overestimate the cost of insurance might be more comfortable with a less-expensive term policy. Coverage is likely needed, and it’s better to have coverage at a lesser rate with term than no coverage at all.
When you look at your life insurance coverage, the drivers that should guide it are life events. If you experience a major life event, you should consider getting a policy or updating an existing policy.
A Deeper Dive into Common Life Events
Major life events include getting married, having or adopting a child, becoming a stay-at-home parent, getting a divorce, getting a new job, starting a business or becoming self-employed, buying a house, caring for aging parents, sending kids to college, and entering retirement. Depending on when those events happen, you should also consider your age.
Let’s take a deeper dive into the three common life events.
Buying a Home
Your home is one of the biggest assets you’ll ever purchase, and it takes a long time to pay for it. A 30-year mortgage is still a very common way to purchase a home, and insurance can provide the leverage to help ensure your family stays in the home.
You bought your home for a reason. It’s likely in the neighborhood you wanted and the school system you wanted your kids to attend, and you don’t want to run the risk of having that plan disrupted.
You want to make sure that if something happens to you, your family can stay in the family home—providing some consistency and a support system in a difficulty time. That’s why you protect that asset and work to ensure there’s an infusion of funds when they may be needed most.
Any time you take on a new mortgage, you want to help ensure your surviving spouse can pay for the house if you’re not there.
Having Kids
When you have kids, you need to evaluate your insurance coverage. Whether it’s one child or multiple, your financial obligation increases. You should consider things like paying for childcare, ongoing expenses associated with raising kids, and saving for college.
New Job or Promotion
When you get a new job or a promotion, you may have a higher income. If your income increases, your social economic landscape could change. You might have more debt obligation from buying a bigger house, and you would have more income to protect.
Families get accustomed to lifestyles based on income. As incomes increase, those lifestyles will potentially change along with them. You want to make sure your coverage is compensatory for your higher income.
Insurance as Part of Retirement Planning and College Savings
Life insurance policies can also be used as additional retirement savings vehicles. Unlike a qualified retirement plan—where the government tells you how much to put in, how much to take out, and when to take it out—a properly funded life insurance policy can give you the freedom to put in as much as you want based on the policy structure. Also, there is typically no limit as to when you can take it out. For example, nobody will stipulate that you have to take it out at a particular age.
In comparing saving this way to a Roth IRA, the income stream could be income tax-free if it’s structured properly. The plan would pay a death benefit to beneficiaries if it wasn’t used as a retirement savings vehicle, as initially intended.
If you have kids, you can use certain policies as part of an approach to saving for college. If your child is already in their teens, it might be too late to incorporate this strategy, as you won’t have enough time to plan for the cash value to accumulate. But if you do have the time, a professional can help you structure a policy as part of your college planning strategy.
If you’re a parent funding college, you could use a life insurance policy’s cash value to pay for a portion of college—perhaps room, board, or books. It’s best to have this be part of a broader strategy that includes other elements, like 529 plans.
For example, for our two kids in college, we used 529 plans for the bulk of our planning. But as a reserve, we have a permanent life insurance policy that has cash value set aside. So if we don’t end up having enough in the 529 plans, we could use the cash value from this policy as a secondary source of college funding.
Are You Underinsured?
Oftentimes people don’t take into account all their needs and compare those with the coverage you have. You might be going off what your colleagues or friends are doing, or you might be going off what you see in advertising.
Professional help and a formal needs analysis would be ideal when trying to determine whether you have enough coverage. But to get a quick gauge, look at four elements:
- Debt Obligations: Look at what you owe, including your mortgage and short-term loans (like car loans).
- Your Age: For example, if you are in your early 40s and want to retire in your 60s, you might need to plan to replace 20 years of your income to protect your family should something happen to you.
- Kids: If you have kids, you should consider accounting for childcare and/or college costs should something happen to you.
- Whether You Have Reserves: Do you have some cash to fall back on? If not, you might need more coverage.
Rely on a Professional for a Custom Solution
Identifying your basics needs is a solid place to start. And while there are many online resources are out there, nothing replaces working with a professional. A financial and insurance professional can help to analyze your needs, consider taxes and other complexities, tell you whether you may be under- or over-insured, and give you an unbiased opinion.
Financial and insurance professionals exist to tailor your insurance solutions to your needs. Reach out today for guidance.
Matt Lewis is a non-registered affiliate of Cetera Wealth Services LLC.
* “2025 Life Insurance Statistics: 42% of Americans Wish They Had More Coverage.” MarketWatch, 9 June2025, https://www.marketwatch.com/insurance-services/life-insurance/life-insurance-statistics/#:~:text=and%20loved%20ones.-,Key%20Findings,and%20their%20families%20%E2%80%94%20financially%20exposed.
Investors should also consider whether the investor’s or beneficiary’s home state offers any state tax or other benefits available only from that state’s 529 Plan. Any state-based benefit should be one of many appropriately weighted factors in making an investment decision. The investor should consult their financial or tax advisor before investment in any state’s 529 Plan.
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