Your company’s life insurance plan may not be enough. Here’s why.
Roughly half of Americans have life insurance, industry estimates suggest. Fewer people own policies that will last beyond their current jobs.
Is that a bad thing?
Maybe so.
The insurance industry, of course, would like to see more Americans buy life insurance. But many financial advisers also recommend life insurance for their clients, for a host of reasons.
Many families don’t purchase as much life insurance as they need, industry experts say, simply because they don’t fully understand how it works.
“For the most part, we see people who are underinsured,” said Justin Dempsey, senior manager for direct-to-consumer business at The Banner Life family of companies.
Fewer than 3 in 10 Americans consider themselves knowledgeable about life insurance, according to the 2025 Insurance Barometer Study, conducted by LIMRA and Life Happens.
Roughly half of Americans have life insurance, according to industry estimates.
And so, in the spirit of simplicity, we’ll keep this discussion simple. Here are a few examples of people who might consider buying life insurance — or more of it.
Roughly 55% of working adults have life insurance through their jobs, according to the Insurance Barometer Study.
That’s great, insurance experts say, but it might not be enough.
When you sign up for life insurance through an employer, you’re generally buying a basic level of coverage: The payout might be one or two years of your salary.
“Group” life insurance is cheap and convenient. But the payout isn’t very high, and the coverage typically ends if you leave the job.
“If they give you two years’ worth of your salary, then you’re basically giving your dependents two years’ worth of your lifestyle after you die,” said Keith Singer, a certified financial planner in Boca Raton, Florida. “And unless your dependents are going to become independent within two years, it’s never enough.”
Singer and other experts say group life insurance lulls workers into a false sense of security: They think they’re covered.
Singer recommends young workers purchase more coverage. You can supplement your employer’s insurance with an individual term life policy.
“Term” life provides coverage for a set term: Say, 20 or 30 years. If you die in that span, your survivors get a payout.
A typical $1 million, 30-year term life insurance premium for a healthy worker at age 30 “is not even $600 a year,” said Catherine Valega, a certified financial planner in Winchester, Massachusetts.
For working Americans in that age group, “everybody should have private term life insurance,” she said. “You’re young. You’re healthy. It’s cheap.”
Fewer than 3 in 10 Americans consider themselves knowledgeable about life insurance, according to an industry study.
Many Americans are woefully unprepared for the costs of long-term care, retirement experts say.
More than 80% of Americans will eventually need help with everyday activities, such as eating or dressing, according to a 2025 study by the Center for Retirement Research at Boston College.
The costs of long-term care can be staggering. The average assisted living facility charged $5,900 a month in 2024, according to a report from CareScout.
“That, in my opinion, might be the biggest unmet need in the insurance market,” said Holly Snyder, president of Nationwide Life Insurance.
Long-term care insurance is an option. But it can get costly, especially if you wait too long to buy it.
Another option is to purchase a life insurance policy with a long-term care rider, which permits you to use some or all of the death benefit to cover long-term care.
“You have access to that money while you’re still living,” Snyder said.
One big advantage: Your beneficiaries still reap the full death benefit in your policy if you don’t tap it for long-term care.
“The nice thing about these hybrid products is, someone gets the money back one way or another,” Valega said.
One common misconception about life insurance, industry experts say, is that its only purpose is to pay a death benefit.
Above, we talked about term life insurance. The industry also offers permanent life insurance, coverage that lasts to the end of your life.
There are many varieties of permanent life policies that can build up cash value over time.
A “whole” life policy generally has fixed payments and a set rate of return and death benefit. “Universal” life has adjustable premiums and benefits. “Variable” life offers performance tied to stock and bond markets or other investments.
Once you’ve built enough cash value, you are often able to withdraw from or borrow against your policy.
“It does act as a flexible financial tool to build cash,” said Nick Lamanna, wealth management advisor at Northwestern Mutual. “It could fund retirement. It could fund higher education.”
Life insurance policies offer many tax advantages. The death benefit is usually tax-free to whomever claims it. Your premiums are generally made after tax, and money you withdraw or borrow is generally not taxed again until you tap out the principal.
“What people don’t understand is that when you have cash value in your policy, you can take a loan against that cash value, and then that money comes back to you tax-free,” Snyder said.
Now, to play devil’s advocate, let’s look at a few scenarios where you might not need life insurance.
Retirees: If you’re no longer working, there may no longer be an income that would need to be replaced upon your death.
“You don’t need insurance if there’s no economic loss if you die,” Singer said.
People with no dependents: You probably don’t need life insurance if “you don’t have anyone who is relying on you for your income,” said Erika Safran, a certified financial planner in New York.
Older Americans. The older you get, the more expensive life insurance becomes. Past a certain age, a new policy might not be worth the cost.
“My question, at age 66, is, why would you be buying life insurance?” Safran said. “It would cost them an arm and a leg.”
