Life Insurance for Low-Income Families: Pros, Cons & Options


Life insurance is invaluable to many families, but maybe none as much as low-income families. Many of these families have either two income earners or are single-parent families with children, and the loss of a single income earner would be devastating to a surviving partner or spouse and their children. 

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Many of these families aren’t aware that there are life insurance companies that specialize in providing low-cost life insurance, and even free life insurance for those that qualify. 

In this article, we’re going to look at life insurance for low-income families. We’ll examine what features low-income families should look for, how to find the best life insurance policy to meet their needs, which reputable companies to consider, how to obtain coverage, and more. 

What Features Should Low-Income Families Look for in a Life Insurance Policy?

There are several features that low-income families should look for when they buy life insurance, including:

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An affordable policy

Life insurance companies and agents who sell life insurance to low-income families will usually provide their prospective clients with a choice of two types of life insurance policies: whole life insurance or term life insurance. Let’s look briefly at each:

Whole life insurance has two components: the death benefit and the cash value.

The death benefit, also known as the face amount of insurance, is the dollar amount paid to the person named the beneficiary on the policy when the insured dies. It is usually paid in a lump sum and is received tax-free by the surviving spouse. A portion of every premium dollar spent pays for the death benefit. 

A portion of the monthly premium also funds the cash value. That money is deposited into the policy's cash value, where it earns interest at a rate determined by the insurance company and grows tax-deferred. Depending on the insurer, money in the cash value account can also be supplemented through dividends paid by the insurance company.

As the cash value grows, it can be withdrawn or borrowed. Many families use the cash value to pay for emergency expenses, help with the down payment on a home, or fund children’s education costs. 

Premiums for permanent policies remain level throughout the life of the policy. The policy will remain in force as long as the policyowner pays the premiums. 

Many couples prefer term life insurance because the cost is lower than permanent life insurance. One hundred percent of the premiums paid, other than fees and commissions, are applied toward the cost of the death benefit; term life insurance accumulates no cash value. 

Term life insurance is temporary life insurance; it will stay in force for a period set by the life insurance company. If the insured dies during that period, the surviving spouse will be paid a lump sum cash benefit. If the insured outlives the period, the policy will expire without value. 

For low-income families, term life insurance will provide the lowest cost for the highest amount of life insurance protection. Though whole life insurance also provides a savings component that families can benefit from down the road, most financial advisors recommend term life to their clients because of its affordability. 

It should be mentioned again that term life insurance will expire after a specified period written in the policy. There are several downsides for the policyholder if they outlive that period and still need life insurance.

First, they will be older when they apply for a new policy, and their new rate will be based on their current age, not their age when they took out the original policy. This might make a new policy unaffordable for a low-income family and leave their family at risk financially. 

Second, the insured may not be physically healthy enough to qualify for life insurance in the future. Even though they may have qualified for the original policy, their health could have changed for the worse, and there is no guarantee that they will be issued coverage they can afford by a life insurance company. Again, this could leave their family in a precarious situation financially.

A convenient payment mode

Most life insurance companies offer multiple ways that insured users can pay their premiums:

  • Monthly
  • Quarterly
  • Semi-annually
  • Annually

The preferred mode of payment for low-income and middle-income families is monthly. Paying premiums monthly reduces the risk that money won’t be available when the premium needs to be paid because an emergency arose and there aren’t funds available for the insured to pay a higher quarterly, semi-annual, or annual premium amount. 

A reputable company

There are hundreds of life insurance companies in the United States that sell life insurance policies to low-income families. Some of those companies that are well-established and have superior financial ratings include:

  • Northwestern Mutual
  • Haven Life
  • State Farm
  • Banner Life
  • Principal
  • Pacific Life
  • Guardian Life
  • Nationwide
  • MassMutual
  • New York Life
  • Allstate
  • John Hancock
  • Protective
  • Mutual of Omaha
  • Prudential

(List courtesy of

Sticking with these three features: affordability, a monthly premium payment mode, and doing business with a financially sound life insurance company will help you select the right policy. In addition, a professional life insurance agent can help you determine how much life insurance you need and how long it takes to get a life insurance payout.

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Are There Free or Low-Cost Life Insurance Options for a Low-Income Family?

Yes, both free and low-cost life insurance options are available for a low-income family. 

Low-cost life insurance options

People between 18–35 years old can find life insurance for as little as $9 per month. Here are rates from some top-rated life insurance companies for a $100,000 term life insurance policy:

Average Monthly Life Insurance Rates by Top-Rated Life Insurance Companies


Average Monthly

Life Insurance Rates

A.M. Best Rating




Banner Life



Guardian Life



Haven Life



John Hancock






Mutual of Omaha






New York Life












State Farm



(List courtesy of

The rates shown above will vary according to an individual’s age, gender, tobacco use, health history, and other factors when they apply for coverage. 

Free life insurance options

There are several ways low-income families can get free life insurance. One way is to get life insurance paid by their employer through a group insurance policy. Some large and medium-size employers offer up to $50,000 of free life insurance to their workers as part of their employee benefits program. Many healthcare companies also provide this benefit to employees.

But, if you don’t work for a company that provides this benefit or you don’t work in the healthcare field, you can find some life insurance companies that offer free life insurance for low-income families to those who qualify. 

One such insurer is MassMutual. Their LifeBridge program is offered free to low-income individuals who qualify for coverage. Requirements that must be met to qualify are:

  • Recipients must be between the ages of 19 and 42.
  • Your dependents must be under the age of 18.
  • The potential policyholder must be in good health.
  • Your salary must be less than $40,000 per year.
  • The policyholder must be a permanent, legal resident of the United States.
  • The only parent or legal guardian in your household who has applied and is in good health as determined by MassMutual’s underwriting guidelines.

Additional underwriting will apply. This free life insurance is not guaranteed to be issued; you must qualify medically.

These policies remain in force for 10 years and provide a $50,000 death benefit. If the insured parent passes away during the 10 years, the death benefit is paid to a trust that holds the funds to pay for a child’s (or children’s) educational expenses. Benefits are paid directly to the school(s) attended; they are not paid to anyone other than the trust. 

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How to Find the Best Life Insurance Policy for a Low-Income Family

Low-income families can find it more challenging to buy life insurance than higher-earning families. Historically, life insurance agents are less likely to spend time helping lower-income families because they buy smaller policies, which results in lower sales commissions paid to the agent. Because of this, most agents target middle-income to high-income families because their commission rate per sale is higher.

Here are a few tips specifically for low-income families who are interested in buying life insurance:

Start online. Going online before you meet with an agent will give you an idea of the prices and the companies that offer policies to low-income families. If you find what you’re looking for online, many life insurance companies will let you apply on their website.

Don’t automatically buy from your auto insurance agent. Insurance companies that are mass-marketers of auto and homeowner’s insurance won’t have the best life insurance products for the lowest rate. Their agents are usually great at what they specialize in, but they’re not experts in the life insurance field. They also usually represent only one company, which can cause you to pay much more than you should have to for an inferior policy.

Work with an independent agent. If you don’t buy a policy online and decide to work with a life insurance agent directly, work with an independent agent. Independent agents represent many different companies and can get quotes from more than one company. This will help you to not overpay for your coverage and make you feel confident about the company you’re applying with.

Have the medical exam. You may be tempted to buy a particular policy because it doesn’t require you to undergo a medical exam. Resist the temptation to do that – policies that don’t need an exam are usually a lot more expensive, and the insurers restrict the face amount of the policy.

Stay within your budget. Some insurance agents will do their best when they talk with you to get you to buy more coverage than you need and spend more money than you should. Only buy the amount of coverage you need. If an agent pressures you to buy more than that, find another agent. 

Alternatives to Life Insurance for a Low-Income Family

Many financial advisors recommend two alternatives to life insurance for low-income family members who are uninsurable due to medical conditions: self-funding and fixed annuities. 

Self-funding: Set up a separate savings or investment account (like mutual funds) and make a regular monthly deposit into that account. It will take time to build that account up to an amount that would help your family pay bills when you die or pay your funeral expenses, but it’s a better alternative than not having a special account set up.

Fixed annuities: These are products provided by insurance companies. The money you deposit into an annuity will grow at an interest rate set by the insurance company, and the growth of the funds deposited won’t be taxed until it’s withdrawn. 

Life insurance is a better alternative than both of these options because it creates a more considerable lump sum of money for beneficiaries than a savings account or annuity, which can take years to accumulate into an amount of cash substantial enough to help a spouse or kids left behind when one of the income providers passes away.

Shop Around for the Best Policy

If you are interested in buying life insurance and your family is challenged financially, talk with several agents or companies and get multiple quotes. And remember, you can always start with a smaller policy if you need to because of a limited budget. Getting started is what matters.


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