Life insurance exists to protect the people who depend on your income if you are no longer there to earn it. That simple purpose cuts through most of the confusion the industry creates: if others rely on your paycheck, you need enough coverage to replace it, and you almost certainly want term insurance to do the job.
Here is who needs it, how much, and why the cheap option is usually the right one.
Who actually needs it
If someone would suffer financially without your income, a spouse, children, aging parents, or a co-signer on your debts, you need life insurance. If no one depends on you financially and you have enough to cover your own final expenses, you may need little or none. Buying coverage for a single person with no dependents is a common way to waste money.
How much coverage
Size the policy to what your dependents would actually need: enough to replace your income for the years they would rely on it, clear major debts like a mortgage, and fund big goals such as college. A common approach adds those up and subtracts existing savings and any coverage you already have. The result is often larger than the rough 'ten times income' rule, but it is grounded in your real situation.
The number can look daunting, until you see how little term coverage costs to provide it.
Why term insurance, for most
Term insurance covers you for a set period, twenty or thirty years, matched to the years your dependents need protection, for a low premium. Whole life lasts forever and builds cash value but costs many times more for the same death benefit. For the vast majority of families, buying term and investing the difference protects them far better and builds more wealth than bundling insurance with investing.
A thirty-year-old can often cover a large term policy for the price of a few coffees a week. Insuring cheaply and investing the savings separately beats expensive whole-life policies for most families.
Compare the two approaches with the term vs. permanent calculator, and buy the coverage while you are young and healthy, when it is cheapest.
Frequently asked questions
How much life insurance do I need?
Enough to replace your income for the years your dependents would rely on it, clear major debts, and fund big goals, minus existing savings and coverage. That is usually more grounded than a simple multiple of income.
Do I need life insurance if I am single with no kids?
Often not, if no one depends on your income and you can cover your own final expenses. Coverage is for protecting dependents, so a single person with no dependents may need little or none.
Should I buy term or whole life insurance?
For most families, term insurance plus investing the difference protects them better and builds more wealth than whole life, which costs many times more for the same death benefit.
When should I buy life insurance?
While you are young and healthy, when premiums are lowest. Locking in a long term policy early keeps the cost down for the decades your family needs protection.
Put your own numbers in.
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