Life Insurance: It Matters More Than You Realize

Anybody who drives around in a car with SiriusXM playing has likely heard of the Ethos Life Insurance commercial that plays sporadically during commercial breaks. The oft-played radio commercial conveys an emotional story often all too familiar to many people who have experienced the death of an immediate family member. Mike Slater, the commercial narrator, tells us about the time his father passed away unexpectedly from a stroke at the age of 63. Despite his father’s good health, his ultimate demise came at an unexpected moment. Fortunately for Mike, his father had the wherewithal to purchase a life insurance policy. As the advertisement progresses, the narrator notes how important life insurance was to providing an income source for his mother and, by extension, for him and his brother. As the advertisement concludes, the narrator reminds the audience that culture strongly disapproves of discussing death.

Death can happen at any moment. It is an unfortunate reality of life. While the emotional sentiment of death lingers for a lifetime, there is a bit of comfort knowing a family member you are close with can offer financial protection in the form of life insurance.

What is Life Insurance?

Life insurance is a legal contract between an individual and an insurance company. The contract design provides financial protection to beneficiaries upon the policyholder’s death. During the contract term, the policyholder will make premium payments to the life insurer until the policyholder’s death. After a policyholder’s death, all beneficiaries listed on the life insurance contract are eligible for a tax-free, lump-sum payment. This death benefit can cover funeral expenses or replace a loved one’s lost income.

What Are the Types of Life Insurance?

Two types of life insurance to consider are term and permanent.

Term life insurance provides coverage up to a specific period (e.g., 10, 20, or 30 years). Death benefit payouts only occur during the life of the contract. If a policyholder outlives the contract, the policy expires without a death benefit payout. This life insurance product is the most affordable option, which explains why younger people gravitate to it.

Permanent life insurance provides lifelong coverage if policyholders remain up to date on premium payments. A fascinating feature of these policies is the “living benefit” component: a savings account that accrues interest over time. Policyholders can borrow or withdraw against this account. Other types of permanent life insurance policies to consider include whole life, universal life, and variable life.

Why Is Life Insurance Popular?

Life insurance is a popular financial product for a few reasons. First, it ensures policyholders’ dependents have a source of income after the policyholder’s death. Second, it can help pay off a decedent’s outstanding liabilities, such as a mortgage or car loans. It can also cover a decedent’s funeral expenses, which can be substantial in some cases. Life insurance policies can also serve as an inheritance gift for any beneficiary listed on the policy.

Life insurers are reporting a slowdown in premium growth in 2026, after a robust 2025. A combination of economic volatility and sticky inflation is pressuring life insurers’ growth ambitions. There is a growing consensus among market participants that the Fed will begin cutting interest rates in the second half of 2026, which may prompt consumers to revise their expectations for life insurance products. Lower interest rates can also negatively impact a life insurer’s reserve growth.

Interestingly, millennials are increasingly interested in hybrid products that combine traditional life insurance policies with long-term care benefits. Once a niche market, long-term benefits are becoming a mainstay for younger generations due to improvements in life expectancy.

Younger consumers who are interested in a life insurance policy will find purchasing one affordable, as most young people are relatively healthy in the eyes of a life insurer. Premiums begin to rise on policies as a person ages or experiments with vices like alcohol or cigarettes. In fact, long-term smokers can anticipate experiencing a significant premium increase over their smokeless peers.

Term life insurance remains a popular and affordable choice for most consumers. It provides coverage for a set period and is a good choice for a policyholder who wants funding available to their beneficiaries to cover minor expenses and lost income. Whole life insurance continues to offer lifelong coverage while building a cash value at a modest rate. Policyholders who are choosier may want to select this type of policy for estate planning purposes. Whole life insurance is also a great choice for high-net-worth individuals.

Although challenges abound for older individuals with health issues, hope exists for purchasing a life insurance policy. There are guaranteed-issue life insurance policies available for those aged 40 or older. These medical-exam-free policies are a solid choice for those in need of a life insurance policy but have debilitating factors that may preclude them from other options. That said, guaranteed issue life insurance policies feature higher premiums and reduced coverage amounts. Talking to an experienced financial planner is important when choosing a life insurance product that aligns with your financial goals.

What To Think About Before Purchasing a Life Insurance Policy

Selecting a life insurance product requires careful consideration. Deliberating on your choices is important not only for your peace of mind but also for your dependents. Ask yourself this question: How much will my dependents need to cover final expenses (e.g., medical bills, funeral expenses, etc.), to replace lost income, and to pay any taxes owed by the estate? Answering these questions helps you determine the appropriate payout amount for a life insurance policy.

Research your options. The life insurance industry is large. Focus on life insurance firms in a strong financial position. You can verify a life insurer’s credit rating via a credible ratings firm, such as AM Best, Fitch, and S&P. Shop early when you decide it’s time to purchase a life insurance policy. Dithering too long can increase your policy’s lifetime costs.

Although you may feel invincible at a young age, father’s time remains undefeated. Thinking about life insurance now protects your family from an unfortunate event that could have life-altering consequences. More importantly, life insurance is a terrific tool to include in your financial toolbox, as it offers you comfort and protection for years to come.