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According to industry estimates, about half of Americans have life insurance. Few people own insurance that lasts beyond their current job.
is that bad?
Maybe so.
Of course, the insurance industry wants more Americans to buy life insurance. However, many financial advisors recommend life insurance to their clients for a variety of reasons.
Industry experts say many families don’t purchase the amount of life insurance they need simply because they don’t fully understand how life insurance works.
“For the most part, we have people who are underinsured,” said Justin Dempsey, senior manager of direct-to-consumer business at Banner Life.
Less than 3 in 10 Americans consider themselves knowledgeable about life insurance, according to the 2025 Insurance Barometer Study conducted by LIMRA and Life Happens.
Who really needs life insurance?
So, for the sake of brevity, I’ll keep this discussion simple. Here are some examples of people who are considering purchasing life insurance or more.
Young workers starting families
According to the Insurance Barometer survey, approximately 55% of working adults purchase life insurance through their job.
That’s great, insurance experts say, but it may not be enough.
When you purchase life insurance through your employer, you typically purchase a basic level of coverage. The amount paid may be one or two years of salary.
“Group” life insurance is cheap and convenient. However, the amount paid is not very high, and the compensation typically ends when you retire.
“If they give you two years’ worth of salary, you’re basically giving your dependents two years’ worth of lifestyle after you die,” says Keith Singer, a certified financial planner in Boca Raton, Florida. “And unless your dependents become independent within two years, it will never be enough.”
Singer and other experts say group life insurance gives employees a false sense of security: They think they’re covered.
Singer encourages younger workers to buy more insurance. You can supplement your employer’s insurance with personal term insurance.
“Term” insurance provides coverage for a set period of time, such as 20 or 30 years. If you die within that period, your survivors will receive your bounty.
Katherine Varega, a certified financial planner in Winchester, Mass., says the typical $1 million, 30-year term life insurance premium for a healthy 30-year-old worker is “less than $600 a year.”
For working Americans in that age group, “everyone should have private term life insurance,” she says. “You’re young. You’re healthy. You’re cheap.”
Older Americans who want long-term care coverage
Retirement experts say many Americans are woefully unprepared for the costs of long-term care.
According to a 2025 study by the Boston College Retirement Research Center, more than 80% of Americans will eventually need assistance with daily activities like eating and dressing.
The costs of long-term care can be significant. According to a report from CareScout, the average cost for an assisted living facility in 2024 was $5,900 per month.
“In my opinion, that may be the biggest unmet need in the insurance market,” said Holly Snyder, president of Nationwide Life Insurance.
Long-term care insurance is optional. But it can be expensive, especially if you wait too long to make a purchase.
Another option is to purchase life insurance with a long-term care rider. This allows some or all of the death benefit to be used to cover long-term care.
“You have access to that money for the rest of your life,” Snyder said.
One big advantage is that your beneficiaries will receive the full death benefit of your policy even if you don’t use it for long-term care.
“The good thing about these hybrid products is that somebody can get their money back in some way,” Vallega said.
High-net-worth households looking for more ways to save money
Industry experts say one common misconception about life insurance is that its sole purpose is to pay a death benefit.
Above, we talked about term insurance. The industry also offers permanent life insurance that provides coverage until the end of your life.
There are different types of whole life insurance that can accumulate cash value over time.
“Permanent” whole life insurance typically includes fixed payments, a fixed rate of return, and a death benefit. “Universal” life has adjustable premiums and benefits. “Variable” life insurance provides performance that is tied to the stock market, bond market, or other investments.
Once you build enough cash value, you can often withdraw or borrow from your policy.
“It acts as a flexible financial tool to grow your cash,” said Nick Lamanna, wealth management advisor at Northwestern Mutual. “It could potentially fund retirement or higher education.”
Life insurance policies have many tax benefits. Death benefits are generally tax-free to the claimant. Premiums are usually calculated after taxes, and money you withdraw or borrow is usually not retaxed until the principal is paid off.
“What people don’t understand is that if your policy has a cash value, you can take out a loan based on that cash value and then you get that money back tax-free,” Snyder said.
Is there really anyone who doesn’t need life insurance?
Now, let’s play devil’s advocate and look at some scenarios where you might not need life insurance.
Retired: If you are no longer working, you may not have any income to replace after your death.
“If there is no financial loss if you die, you don’t need insurance,” Singer says.
People without dependents: Erica Safran, a certified financial planner in New York, says if you “don’t have anyone relying on you for income,” you probably don’t need life insurance.
older Americans. The older you get, the more expensive life insurance will be. After a certain age, new insurance may not be worth the money.
“At 66 years old, my question is: Why buy life insurance?” Safran said. “Then they will lose an arm and a leg.”
