Among the many GoFundMe campaigns that went viral this year was one about a young family that suddenly lost their main provider. Friends, neighbors, and even strangers stepped in, donating thousands of dollars to cover funeral costs, childcare, and living expenses. It was moving, but it also revealed a painful truth: many families rely on the kindness of others in moments of tragedy because they don’t have a financial safety net in place.” 

Life insurance is not always a popular subject. Talking about death or imagining what would happen to your loved ones if you weren’t around can feel heavy, even overwhelming. But as Benjamin Franklin famously said, “By failing to prepare, you are preparing to fail.” Planning ahead is not about expecting the worst—it’s about protecting the people you love the most. 

According to a 2023 LIMRA report, nearly 40% of Americans don’t have life insurance of any kind, and those who do often have less coverage than they actually need. This gap leaves many families financially vulnerable. Life insurance is one of the simplest and most reliable ways to bridge that gap. 

Life insurance is an agreement between you and an insurance company. You pay premiums, and in return, the company promises to provide a set amount of money to your chosen beneficiaries when you pass away. Think of it as a financial safety net, designed to catch your loved ones at their most vulnerable moment. 

Let’s break down the basics of how it works and the top five reasons why it matters. 

A few key terms to understand: 

• Premiums: What you pay regularly to keep the policy active.

• Coverage amount (or death benefit): The lump sum your beneficiaries receive when you pass.

• Beneficiaries: The people you choose to receive the money.

• Term: How long the policy lasts—could be 10, 20, or 30 years, or even your whole life, depending on the type of insurance.

• Claim: The process your family goes through to receive the payout. 

How Does Life Insurance Work? 

You can think of life insurance like a subscription. As long as you keep paying your premiums, you’re covered. If you die while your policy is active, your beneficiaries can file a claim to receive the payout. 

The cost of your premiums depends on: 

• Your age, health, and lifestyle

• The type of life insurance (term vs. permanent)

• The amount of coverage you choose
   

This process is called underwriting, where the insurance company reviews your application to determine your risk level and cost. Once approved, your coverage begins. 

But here’s the key: life insurance only works if it’s in place before you need it. That’s why experts often advise getting coverage earlier in life, when premiums are generally lower and your health is more favorable. 

Do You Really Need Life Insurance? 

The simplest way to answer this is with one question: 

If I wasn’t here tomorrow, would anyone I care about struggle financially because of it? 

If the answer is yes, then life insurance is worth serious consideration. Here are common scenarios where life insurance is especially important and top reasons you might need it. 

1. You Contribute to Your Family’s Income

If your income helps pay for housing, groceries, childcare, or everyday living, your absence could leave your family in a difficult position. If your paycheck supports your household, even partially life insurance can replace that income if something happens to you. Without it, your spouse or children might face immediate hardship, from keeping the lights on to paying the mortgage. 

 2. You Have Kids

Raising kids is rewarding but costly. From daycare to college tuition, the expenses add up. Even if you don’t bring in income, the value of the care you provide is significant. Life insurance ensures that even in your absence, your kids have the stability and opportunities you planned for. 

3. You Have a Mortgage or Shared Debt

Many loans don’t go away if something happens to you. 

A mortgage, student loan, or car payment in some cases don’t disappear if you pass away. If you share that debt with a spouse, parent, or co-signer,  that responsibility may fall entirely on them. Life insurance helps protect your loved ones from being left with heavy financial burdens. 

 4. You Run a Business

For entrepreneurs, life insurance can be crucial. Many business owners take on personal debt to grow their companies. If you co-own a business, a policy can also fund a “buy-sell agreement,” allowing your partner to buy your share and keep the business running without financial strain on your family. 

5. Your Workplace Coverage Isn’t Enough

Many employers offer group life insurance as part of their benefits, While this is a good start, coverage is usually limited—often one or two times your salary. Financial experts generally recommend having coverage worth 10 to 15 times your annual income. That’s why individual policies are important, even if you already have coverage at work. 

Side note: If you’re unsure how much coverage you need, start with a simple life insurance calculator to estimate your family’s needs. What matters most is starting the conversation and taking the step to protect your future, and theirs.