What Are The Advantages And Disadvantages Of Life Insurance?

Written By Licensed Agent Aten-Re ElFebruary 15, 2023

Trying to figure out if you need life insurance can be super complicated.

But the truth is:

That there are probably more good reasons to have life insurance than there are reasons not to have  it.  

advantages and disadvantages of life insurance

Beyond cost, what downside could insuring your family’s financial security pose? 

In this guide, I will walk you through the advantages and disadvantages of life insurance in plain English—no complicated insurance lingo. 

The Advantages of Buying Life Insurance

Over half of all Americans (54%) have a life insurance policy as of 2021, and at least fifty percent of adults look up life insurance information online.

It’s clearly a hot topic, so let’s talk about the general advantages of life insurance:

  • You can accumulate cash value
  • Certain plans enable you to make investments in a portfolio
  • If you have significant debt, life insurance can prevent your loved ones from acquiring your debt without a way to repay it
  • Life insurance riders can help you plan for unexpected outcomes or acquire money for big expenses like a mortgage or a child’s college tuition

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The final insurance policy premium for any policy is determined by the underwriting insurance company following the application.
  • Life insurance enables you to plan for your family’s future so that they will not be left in a bind after your death, particularly if you are the sole financial provider of the household
  • For estate planning, life insurance allows you to pay off tax liabilities so that your beneficiaries can inherit your physical estate without issue and receive a tax-free death benefit

However, the exact advantages of life insurance vary depending on the kind of policy.

We’ll be focusing on the advantages of the two most common policies: term life insurance and whole life insurance (also known as permanent life insurance).

Advantages of Term Life Insurance

  • Initially less expensive premiums than whole life insurance, which can be great if you’re trying to save money right now
  • Set terms (i.e., 5, 10, 15, and 20 years) makes it easy to plan for short-term expenses without committing to a lifelong plan
  • You can usually convert the policy to a whole life plan before your policy ends

Advantages of Whole Life Insurance

  • The coverage lasts your whole life, so your family’s financial future will remain secure 
  • You can build cash value or equity in a way that you can’t with term life plans
  • The plan becomes a consistent part of your long-term financial planning
  • Tax-free death benefit—in most cases


Life Insurance made easy.

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Get quotes and sign up online without talking to an agent. But, we are here if you need us. 

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The Disadvantages of Buying Life Insurance

The disadvantages of buying life insurance may be less obvious, but they still exist. Here are some of the most common disadvantages:

  • Fear that money-driven insurance agents will scam you. But life insurance is not a scam.
  • The inability to pay a monthly premium
  • Lack of dependents who would need a death benefit
  • The contestability period
  • The cost of your insurance being contingent on your medical history

The disadvantages of life insurance also vary depending on the kind of policy you purchase.

Disadvantages of Term Life Insurance

  • The policy is, by nature, temporary, so you can’t plan for unexpected life crises beyond the end of your life insurance term.
  • Premiums increase as you renew the coverage, so the policy can get quite expensive over time.
  • Policies lack the flexibility to change during the term period

Disadvantages of Whole Life Insurance

In general, you’ll find many self-proclaimed finance experts online who criticize whole life insurance. Why? It mainly has to do with one thing—cost.

Whole life insurance generally offers more expensive initial premiums than the short-term term life insurance, even though the amount of the death benefit may be exactly the same in both policies.

But as we stated before, the cost of the premium stays the same over time, so it’s really an advantage to buy whole life insurance in the long run. 

How to Get the Best Out of Your Life Insurance

If you’ve stuck with us this far, you might be wondering how to maximize the advantages of a life insurance policy.

Start Early

Whether you opt for term or whole life insurance, your premium will be at its lowest when you're young.

Average insurance premiums tend to increase between 5 and 12 percent per year of age, starting around age 40.

Form Healthy Habits

Lifestyle habits do affect your premium in most cases. Things like smoking or a high BMI can result in a significant increase—but the good news is that you can change these factors.

You'll not only pay less for life insurance but also potentially increase your lifespan.


Life insurance by state.

With a Life Insurance policy you can take care of your family the right way.

Should anything happen to you, you'll want to leave your loved ones a financial nest egg for their wellbeing. Click on your state to find out more.

AlabamaALAlaskaAKArizonaAZArkansasARCaliforniaCAColoradoCOConnecticutDelawareFloridaFLGeorgiaGAIdahoIDIllinoisILIndianaINIowaIAKansasKSKentuckyKYLouisianaLAMaineMEMarylandMassachusettsMichiganMIMinnesotaMNMississippiMSMissouriMOMontanaMTNebraskaNENevadaNVNew HampshireNew JerseyNew MexicoNMNew YorkNYNorth CarolinaNCNorth DakotaNDOhioOHOklahomaOKOregonORPennsylvaniaPARhode IslandSouth CarolinaSCSouth DakotaSDTennesseeTNTexasTXUtahUTVermontVirginiaVAWAWest VirginiaWVWisconsinWIWyomingWYVermontVTNew HampshireNHMassachusettsMAConnecticutCTNew JerseyNJMarylandMDHawaiiHIRhode IslandRIDelawareDE

Review Your Policy Every Three Years

While you can review your policy and compare quotes as often as you like, every 3 to 5 years is a good guideline, or after any major life event, such as a marriage or the birth of a child.

You change—so do your life insurance needs. 

Pay Annually 

If you can, pay your premium annually rather than monthly. Many insurance companies will offer a discount, sometimes as much as 10 percent, for annual payments.

Setting up auto-pay also sometimes comes with modest savings. 

Optimize Your Policy with Riders

Life insurance riders are an excellent way to customize your plan to your specific needs, maximizing the benefits to you personally.

You can add riders for everything from waiver of premiums in the event of disability to the ability to draw your benefits during your lifetime. We particularly recommend that second one.

An accelerated death benefit rider allows you to access your insurance payout if you become terminally ill and need funds to cover your end-of-life expenses.

Alternately, a chronic illness rider allows you to draw from your policy if you need funds to cover in-home care. 

life insurance advantages and disadvantages


Life Insurance made easy.

Agents not required.

Get quotes and sign up online without talking to an agent. But, we are here if you need us. 

Unbiased, expert advice.

Get unbiased insurance education from licensed experts and also avoid dodgy sales calls.

Coverage in minutes.

You can get life insurance coverage within minutes of getting your quotes and applying.

Taking Action

As you can see there are plenty of advantages to having life insurance and honestly, I believe everyone needs to get life insurance even if it's a small policy.

Also, if you want to get the most out of your insurance, you want to make sure you get the best rate possible and we make it simple to compare quotes from the best life insurance companies fast. 

If you need life insurance, you can get immediate quotes and coverage by clicking here or on any of the above buttons.