6 Key Benefits of Life Insurance Everyone Should Know

Talking about life insurance isn’t always easy, but it matters more than you may realize. According to a 2025 Insurance Barometer Study, 51% of adults in the US say they have some form of life insurance, yet 40% believe they need more.

Life insurance isn’t just about covering the basics. Many plans offer benefits beyond financial protection. Here are six benefits of life insurance worth understanding.

1. Life insurance provides financial protection for loved ones.

The biggest reason people take out life insurance policies is to help protect their loved ones from financial strain, beginning with burial and final expenses, followed by transferring wealth and leaving money for their family. Ensuring that level of protection requires a clear understanding of a family’s financial picture.

“I have my customers do a needs analysis,” says Damien Hardy, an insurance specialist based in Columbus, Ohio. “I write down income, assets, and liabilities, including future college expenses and mortgage payments. Then, we have a number, and we adjust the amount of life insurance that the customer needs.”

2. Life insurance offers choice so that you can match coverage to your goals and budget.

Life insurance generally falls into two main categories, each with different costs and benefits:

• Term life insurance: Coverage lasts for a set period (typically one to 30 years) and is usually the most affordable option—ideal for temporary needs such as income replacement or paying off a mortgage. It doesn’t build cash value, unless you choose a return-of-premium policy that refunds some money if you outlive the term.
• Permanent life insurance: Coverage is lifelong and builds cash value over time, making it a good fit for long-term planning, but it costs more than term insurance.
• Whole life insurance: Offers fixed premiums, guaranteed cash value growth, and a guaranteed death benefit.
• Universal life insurance: Allows flexibility to adjust premiums or the death benefit as your financial situation changes.

3. You may be able to use benefits while you’re still alive.

Some life insurance policies offer “living benefits,” which means they can help you financially if you experience a serious health event. If you become disabled or chronically or terminally ill—or, in some cases, if you outlive your life insurance policy—you may be able to access benefits such as waived premiums or money to help pay for in-home care or nursing home care. These benefits are usually included through a rider on permanent life insurance and are designed to provide support during unexpected illness.

4. You can potentially borrow from your life insurance policy.

With a permanent life insurance policy, you build cash value over time as you pay premiums. Depending on the type of policy, that cash value may grow either at a guaranteed or market-linked rate. You may be able to access this cash value through a policy loan or withdrawal. If you tap into that cash reserve early, however, you may face reduced death benefits, policy restrictions, or—if loans aren’t repaid—impacts on the policy’s performance or even a lapse.

5. There may be tax benefits for you and your heirs.

Both permanent and term life insurance policies typically pay out to beneficiaries free from federal income tax. And if you have a permanent policy, the cash value of it grows tax-deferred, meaning you can potentially accumulate more savings over the life of the policy.

Additionally, loans or withdrawals you take against the policy are generally not considered taxable income, and some withdrawals may also be tax-advantaged as long as the policy remains in force and certain limits are met.

6. You can include life insurance in your estate plan.

Life insurance can be an effective estate-planning tool. Death benefits typically go directly to beneficiaries, are generally income-tax-free, and frequently avoid probate, which can help them access funds more quickly. If you have a larger estate, the policy can also help cover potential estate taxes and other settlement costs and provide funds to balance inheritances among your heirs. (Tax rules vary by state as well as by how policies are structured, so consult a qualified estate planner or attorney for advice.)