When people hear the words life insurance, they’re often met with more questions than answers.

Should you buy term or whole life insurance? Is life insurance really an investment? What is “infinite banking,” and is it as good as social media makes it sound? And while everyone seems to talk about life insurance, hardly anyone is talking about the financial protection that’s statistically more likely to matter during your working years…disability insurance.

The truth is that insurance doesn’t have to be confusing. At its core, insurance exists for one reason: to protect you from financial risk.

Editor’s Note: This article is adapted from a conversation between Prisca Benson, founder of Our Green Life, and Tony Steuer, Financial Readiness Advocate, author, and host of the Get Ready Before Life Happens podcast. Together, we explored the often-confusing topics of life insurance, disability insurance, and financial risk protection to help you make informed decisions based on your family’s needs, instead of sales tactics.

Key Takeaways

✔ Life insurance is designed to protect people who depend on your income.

✔ Disability insurance protects your earning ability and deserves just as much attention.

✔ Choose insurance based on your financial goals, not sales pitches.

✔ Separate insurance decisions from investment decisions whenever possible.

✔ Review your coverage regularly as your financial life evolves.

Whether you’re building wealth, raising a family, or simply trying to make smart financial decisions, understanding how life insurance fits into your overall financial plan can save you thousands of dollars, while giving you peace of mind.

In this guide, we’ll separate fact from fiction, explain when life insurance makes sense (and when it doesn’t), discuss why disability insurance deserves far more attention, and help you make decisions based on your goals, not someone else’s sales pitch.

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The Biggest Misunderstanding About Insurance

During our discussion, Tony and I kept coming back to one central idea: insurance should always begin with understanding your financial risks, not with choosing a product. That simple shift in perspective can completely change how you evaluate life insurance, disability insurance, and your overall financial plan.

One of the most common mistakes people make is choosing a specific insurance product before they understand what they’re trying to protect.

Too often, the conversation starts like this:

“Should I buy whole life insurance?”

But the better question is:

“What financial risk am I trying to protect against?”

That shift changes everything.

Insurance should never be purchased simply because someone told you it’s the “best” product. It should solve a specific problem.

Before purchasing any policy, ask yourself:

• Who depends on my income?
• What would happen financially if I died?
• What would happen if I couldn’t work?
• How long would my family need financial support?
• Could we maintain our lifestyle without my paycheck?

Once you answer those questions, choosing the right type of coverage becomes much simpler.

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Insurance Is About Risk, Not Investments

One of the most powerful ideas in personal finance is understanding the purpose of insurance.

Insurance is risk management. It is not designed to maximize investment returns.

Think about other insurance policies you already own.

If you have a car, you buy auto insurance because there’s a chance you’ll have an accident.

If you own a home, you buy homeowners insurance because your house could be damaged by fire, storms, or theft.

Life insurance works exactly the same way.

You’re paying an insurance company to take on financial risk so your loved ones aren’t left carrying the burden if something happens to you.

Once you understand this principle, many of today’s confusing marketing messages begin to lose their appeal.

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Why Disability Insurance Deserves More Attention Than It Gets

Ironically, while life insurance receives most of the attention, disability insurance may actually be one of the most valuable forms of protection during your working years.

Many people think of disability insurance only in connection with pregnancy or maternity leave because that’s often when they first encounter it through an employer. But disability insurance covers much more than that.

It can help replace income if you experience:

• Cancer treatment
• Major surgery
• Serious illness
• Recovery from an accident
• Extended medical leave
• Chronic health conditions
• Partial disability that limits your ability to work

Rather than thinking of disability insurance as protection against disability, it’s more accurate to think of it as income protection insurance.

Your greatest financial asset isn’t your house or even your retirement account. It’s your ability to earn an income.

Without income, every financial goal becomes harder to achieve.

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Ask Yourself One Simple Question

Determining whether you need disability insurance doesn’t have to be complicated.

Ask yourself: Do I depend on my paycheck?

If the answer is yes, disability insurance deserves serious consideration.

Your income pays for:

• Your mortgage or rent
• Groceries
• Utilities
• Childcare
• Retirement savings
• Debt payments
• Vacations
• College savings
• Everyday living expenses

If your paycheck disappeared for six months, or even a year, what would happen? That’s exactly the risk disability insurance is designed to address.

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Many People Already Have Some Disability Coverage…But It May Not Be Enough

If you’re employed full-time, your workplace may already provide disability insurance. That’s a great start.

However, employer-sponsored policies often replace only a portion of your income.

Depending on the plan, benefits may cover approximately 60–70% of your income, leaving you responsible for the remaining gap.

For many families, that difference can significantly affect their monthly budget.

It’s worth reviewing:

• How much income your employer’s policy replaces
• How long benefits last
• Whether taxes affect your benefits
• Whether supplemental coverage makes sense

Many professionals choose to purchase an individual disability policy to fill those gaps.

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How to Shop for Disability Insurance

Not all disability insurance policies are created equal.

Instead of focusing only on price, look for an insurance professional who:

• Represents multiple insurance companies
• Understands your profession
• Can compare policies objectively
• Has experience with medical underwriting

Different insurance companies specialize in different occupations. A company that’s excellent for physicians may not offer the strongest coverage for teachers, engineers, or nurses.

Shopping multiple carriers helps ensure you’re getting the policy that’s the best fit, not simply the one someone has available to sell.

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The Truth About Life Insurance: Protection First, Investment Second

Few financial products generate as much debate as life insurance. Some people swear by permanent policies, while others insist that term life insurance is the only option worth considering. The reality is much simpler than the marketing often suggests.

Before choosing any policy, remember this guiding principle:

Life insurance is designed to replace income, not build wealth.

If someone relies on your income to maintain their lifestyle, pay the mortgage, raise children, or cover daily living expenses, life insurance can provide critical financial protection.

If no one depends on your income, your need for life insurance may be much smaller or may not exist at all.

When you start with your financial goals instead of an insurance product, choosing the right coverage becomes much easier.

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Who Actually Needs Life Insurance?

One of the biggest misconceptions is that everyone needs life insurance.

In reality, the answer depends on whether someone would experience financial hardship if you were no longer here.

You should strongly consider life insurance if:

• You have children who depend on your income.
• You’re married or have a partner who relies on your paycheck.
• You have significant debt that someone else would inherit.
• You own a business with financial obligations.
• You care for aging parents or other dependents.
• You have someone with special needs who will require lifelong financial support.

On the other hand, your need for life insurance may be limited if:

• You’ve reached financial independence.
• You’ve accumulated enough assets to self-insure.
• No one depends on your income.
• Your debts are paid off.
• Your retirement savings can adequately support your family.

Remember: Life insurance should solve a financial problem, not create one.

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Term Life Insurance vs. Whole Life Insurance

This is one of the most searched questions online, and understandably so. Let’s simplify it.

What Is Term Life Insurance?

Term life insurance provides coverage for a specific period of time…typically 10, 15, 20, or 30 years.

If you pass away during that term, your beneficiaries receive the death benefit. If you outlive the policy, the coverage ends.

Because it focuses solely on insurance protection, term life insurance is usually the most affordable option.

It’s ideal for protecting temporary financial responsibilities, such as:

• Raising children
• Paying off a mortgage
• Replacing income during working years
• Covering education expenses
• Protecting a spouse while retirement savings grow

For many families, term life insurance offers exactly the protection they need at a fraction of the cost of permanent policies.

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What Is Whole Life Insurance?

Whole life insurance is a permanent policy designed to remain in force for your entire life, as long as premiums are paid.

Unlike term insurance, whole life policies include:

• A death benefit
• Cash value accumulation
• Higher premiums
• Long-term contractual commitments

The cash value grows slowly over time, and many policies allow policyholders to borrow against that value. This feature is often highlighted in marketing materials but it’s important to understand exactly how it works.

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Is Life Insurance a Good Investment?

This question deserves a careful answer. Some permanent life insurance policies include an investment or cash-value component. However, that doesn’t necessarily make them good investment vehicles. Why?

Because every premium payment first pays for the cost of insurance. Only after insurance costs, administrative fees, and other policy expenses are covered does any remaining amount contribute to cash value. That means your money has multiple hurdles to clear before it begins working for you.

For many people, investing separately through retirement accounts and brokerage accounts may provide greater flexibility and growth potential while keeping insurance and investing as two separate strategies.

The key takeaway is this: Insurance should protect your financial plan, not replace it.

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The Truth About “Infinite Banking” and “Be Your Own Bank”

Social media is full of videos promoting strategies with names like:

• Infinite Banking
• Become Your Own Banker
• The Missing Money Concept
• Bank on Yourself

These strategies are often presented as revolutionary wealth-building systems. In reality, they are generally built around cash-value life insurance policies.

That doesn’t automatically make them bad. But it does mean consumers should fully understand what they’re buying before signing a long-term contract.

Here are a few important considerations.

You’re Buying an Insurance Policy

Despite the investment language used in many advertisements, you’re still purchasing an insurance contract.

The policy’s primary purpose is insurance. Any investment component comes second.

Policy Loans Aren’t Free

One common claim is that you can “borrow your own money.”

While you can borrow against your policy’s cash value, policy loans often include interest charges. It’s important to understand those costs before assuming you’re simply accessing your own savings.

Liquidity Can Be Limited

Many permanent life insurance policies include surrender charges during the early years. This means withdrawing your money early may come with significant penalties.

If flexibility and easy access to your savings are priorities, this is an important factor to evaluate before purchasing a policy.

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When Does Whole Life Insurance Make Sense?

Although whole life insurance isn’t necessary for most households, there are situations where permanent coverage can play a meaningful role.

Examples include:

• Estate planning for high-net-worth families
• Providing lifelong financial support for a dependent with disabilities
• Specialized trust planning

These situations typically involve broader financial and legal planning rather than everyday insurance needs.

For most working families focused on protecting income during their earning years, term life insurance often aligns more closely with their goals.

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Don’t Buy Insurance Because Someone Says You Should

One of the best pieces of financial advice is this:

Start with your goals, not with a product. – Tony Steuer

Instead of asking, “Should I buy whole life insurance?”

Ask:

• What am I trying to protect?
• Who depends on me financially?
• How long will they need support?
• What risks would create financial hardship?

Once you know the answers, selecting appropriate coverage becomes much more straightforward.

That’s true not only for life insurance but for every financial decision you make.

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Common Life Insurance Mistakes to Avoid

Many people unintentionally spend thousands of dollars on insurance that doesn’t match their needs.

Avoid these common mistakes:

Buying Before Understanding Your Goals

Insurance should fit your financial plan, not become your financial plan.

Assuming More Coverage Is Always Better

The goal is adequate protection, not unnecessary complexity.

Confusing Insurance With Investing

Insurance protects wealth. Investments build wealth. They can work together, but they serve different purposes.

Forgetting to Review Existing Coverage

Your insurance needs change over time. Marriage, children, paying off debt, career changes, and retirement all affect how much coverage you need. Review your policies every few years to ensure they still align with your life.

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Final Thoughts: Build Your Financial Plan Around Your Life

Life insurance isn’t about predicting the future. It’s about preparing for it.

The best insurance strategy is one that reflects your goals, protects the people you love, and fits comfortably within your budget.

Whether you’re evaluating life insurance, disability insurance, or both, remember that insurance is only one piece of a healthy financial plan.

As your savings grow, your debt decreases, and your financial independence increases, your insurance needs may change right along with them.

The goal isn’t to own the most insurance but to have the right insurance so you can spend less time worrying about “what if” and more time building the life you’re working so hard to create.

Meet the Experts

Prisca Benson is a money coach and the founder of Our Green Life, where she helps professional women simplify their finances, eliminate debt, build wealth, and create financial freedom through intentional money management. Learn more on her YouTube channel.

Tony Steuer is a Financial Readiness Advocate, author, and host of the Get Ready Before Life Happens podcast. He specializes in helping individuals and families build financial readiness by understanding insurance, risk management, and long-term financial planning.