There are many varying opinions about whether or not Christians should have life insurance. As part of our stewardship responsibility, we need to determine what role (if any) life insurance has in the finances the Lord has entrusted to us.
The focus of this post is to look at the biblical principles that can be helpful when evaluating life insurance, how to apply them when considering insurance, and the areas of concern to watch out for. I hope this challenges you as you consider this important issue.
How It Works
Life insurance is meant to provide money to your loved ones when you die. It is a contract between an insurance company and the insured person. If the insured meets the terms of the contract, and dies while the policy is still in force, the insurance company will pay out money called a death benefit. There are many different ways to use life insurance to meet expected needs, which will be discussed later in this post.
There are two main types of life insurance: term and permanent.
- Term insurance is buying coverage for a specific number of years (10, 20 or 30 etc). At the end of the term, your policy ends and so does the death benefit. In essence, you are renting the insurance for a specific period of time. For example, let’s say you buy a 10 year term policy and die in year 8. Assuming you met all the policy terms, the insurance company will pay out the death benefit to your beneficiaries. If you were to die in year 11, your beneficiaries receive nothing as the policy has ended. During the term, to keep the policy active you need to pay the premium. You can cancel the policy at any time by not paying the premium.
- Permanent insurance is coverage that can last your entire life. It generally tends to be more expensive than term insurance, and is a bit more complicated. There are several different types of permanent insurance (which is beyond the scope of this post), but they work in a similar fashion. A premium is paid to the insurer per the terms of the policy. In the early years (when you are younger, and a lower probability of dying), the insurance cost is cheaper than the premium, so cash builds in the policy. In later years, the excess cash (from prior years) is used to help pay the higher insurance cost. There needs to be cash in the policy to remain active. Once the cash is exhausted, the policy ends.
For both term and permanent insurance, if a death benefit is paid out, there is no tax owed on it.
What The Bible Says
Life insurance is not discussed in the Bible, as it did not exist at the time. However, there are two main principles to weigh:
Provide for your family
1 Timothy 5:8 says “But if anyone does not provide for his relatives, and especially for members of his household, he has denied the faith and is worse than an unbeliever.”
If God has blessed you with a family, you have a responsibility to provide for them. This implies an active role on your part to provide, utilizing the tools that God has given you. Applying this principle means that we need to be continually assessing the needs of our family and addressing any needs that may arise. Proactively planning for potential needs of your family is an appropriate response to your responsibility before the Lord.
Rely on God’s Provision
In Matthew 6:26 Jesus says “Look at the birds of the air: they neither sow nor reap nor gather into barns, and yet your heavenly Father feeds them. Are you not of more value than they?”
God promises to provide for our needs (not our wants), like He does for the birds. We are infinitely more special to God than birds, as we are created in His image. There are many examples of God providing for His people in the Bible such as God providing Israel with manna each morning while they were wandering in the desert, God providing for Ruth through gleaning, God’s provision for Elijah while in the desert etc. In much the same way, God faithfully provides for our needs on a daily basis. We need to rely on God’s promise of provision, because everything ultimately comes from Him.
What Is The Issue?
These two principles seemingly conflict with one another and have led to confusion. Some Christians say that having insurance (or utilizing government assistance) means you are choosing not to rely on God for provision, and thereby lack faith. Others say we should use the tools that God has provided, but end up trying to cover every possibility (by buying an extra-large amount of insurance). Inadvertently they are relying on the tools rather than on God.
Like everything in life there needs to be a balance. God can certainly use life insurance, government assistance etc to provide for our needs, but if we view them as our provision instead of God, we have gone too far. Similarly, if we don’t do anything to address the needs in our life and expect God to fulfill them, that is also out of alignment.
There needs to be a balance between relying on God and being responsible with the tools that are available to us. That balance will look different for each one of us.
Finding A Balance
So, how can we strike this balance? Here are a few thoughts that may help:
We Are Responsible
Though God promises to provide for all our needs, we have a responsibility to do our part to meet those needs. Proverbs warns repeatedly about the sluggard who does nothing to better his situation. We need to be actively working to provide for our families and be better stewards of what God has entrusted to us. Using tools (such as life insurance) in a responsible manner to help meet those needs may be an appropriate response.
Families and Churches
If the Amish can care for their widows without life insurance, our families and churches need to do a better job of caring for widows. Yes, the culture has changed since the early church times found in Acts, but Christians are not released from God’s commands to care for the orphans and widows.
There Should Be A Need
Insurance salesmen are notorious for advocating insurance for your entire life. That may be necessary in some instances, but for many people it is better to insure yourself when a need arises. If you are living below your means, limiting debt etc, you may get to a point where you don’t have a need for life insurance
There are many different ways that life insurance can be used. Below are a few of the common ones, with points to consider:
1. Provide For Your Family
Sadly, I have seen too many younger husbands die with little or no life insurance. Their wife needed to go back to work full-time in order to support the family. The children essentially lose both their parents.
Purchasing a policy to help the surviving spouse care for the family and ensure they will be around to have a role in their children’s lives, is very important.
However, you can buy too much insurance and provide for your family in perpetuity. Will this help them to rely on God for their provision? Will it undermine your church and other family from helping to provide for their needs?
2. Pay Off Debts
Some people advise buying a policy to pay off a large amount of debt to keep your testimony intact. Certainly, we should pay back all our debts, as it is a matter of integrity and our witness. If you have a family and have a large mortgage, having a policy to pay it off is not a bad idea.
If you are in the position of potentially taking on a large amount of debt, I would encourage you to reconsider. Paying down debt takes time and reduces our flexibility to respond to the Lord’s leading. If you buy a policy to pay it off, it only compounds the problem (by putting less money towards paying off the debt). Though buying a policy may be the best option in some circumstances, it is normally better to avoid debt in the first place if possible.
3. Help Heirs Pay Estate Taxes
If someone has a large amount of assets and wants to pass them on to others when they die, there could be Federal estate and state inheritance taxes due that consume a large portion of the assets. Rather than saddle their heirs with a large tax bill, a life insurance policy can be purchased and owned by a Trust, that will provide funds to cover some or all of the taxes.
As of 2021, the current Federal estate tax exemption is quite high historically ($11.7 million), so this strategy is not as commonly used as in the past.
If you are thinking of leaving a large amount of money to your heirs, is that a wise idea? You can read more about this in a related post about a Biblical perspective on estate planning.
4. Benefit Church/Mission Organizations
Purchasing a policy and naming a charity(ies) as the beneficiary, enables you to give in a much more significant way. By paying a premium consistently to keep the policy in force, you can leave a much larger gift to support the Lord’s work.
However, the regular premium you pay is money that could be given now. There is the chance that the insurance company may go bankrupt, the policy will require additional premiums down the road, or the policy may end because the premiums become too expensive. Would it be better to give now?
5. Final Expenses
As burial/cremation costs continue to increase, people are tempted to buy a policy that will help cover those costs. In some cases, this may be the best option. But if you have the money to pay for your final expenses, why not do so now? Not only will it help those who you leave behind (they won’t have to do it), but you can also lock in a lower price today.
If you decide you need life insurance, here are a few points to be mindful of:
Buying Too Much
Rather than trying to cover every possibility, buy what you need. Some insurance agents try to sell you more coverage than you need, as they receive a commission based on the amount of death benefit you purchase. Definitely listen to your agent’s recommendations and ask for their calculations as you may have missed something, but determine what you need rather than just accepting their recommendation.
Insurance For A Season
Insurance agents many times encourage clients to buy insurance that will cover their entire lifetime (as they receive a commission when you buy the policy and each year you pay the premium). Though there are circumstances where this is appropriate, many people don’t stop and think about the cost and whether they are using an insurance company to replace God’s promises of provision.
My philosophy on insurance is you want to have it for as long as you need it. Generally, young families need insurance to provide for the family in case one of the parent’s dies. If after the children are on their own, and the parents have minimal debt, there may not be a need for insurance.
Captive Agent vs Broker
When you shop for insurance, this is an important distinction. A captive agent only sells insurance provided by one company (for example, State Farm or Nationwide agents). A broker can sell insurance offered by many different companies, enabling you to compare your options more broadly and potentially get a lower price.
Life insurance is a tool that can be valuable in different seasons of life. If we use it as a tool and don’t put our faith in it, it can be helpful. If we come to the point that our faith is in the ability of insurance to provide what God has not, then it has dethroned God in our lives and has become an idol.
Points to Consider
- What is your view on insurance and the role it will play in your life?
- If you buy term insurance, it may be helpful to buy a longer term than needed. You may become uninsurable later in life. You can always cancel it early if you don’t need it.
- Is your faith in the insurance company or government to provide, or in the Lord?
- Be careful to insure what you need. Don’t buy so much that your loved ones rely more on the money from the policy than on God.
- It is not a bad thing to rely upon your church and family. Dependence upon the Lord providing through others is what being a Christian is all about.