The Moment
You have people who depend on your income — a spouse, children, or aging parents. If you died tomorrow, could they maintain their standard of living? If the answer is no, you need life insurance. If the answer is yes (no dependents, sufficient assets), you do not.
Life insurance is not about you. It is about the people you leave behind.
The Calculation
The simple formula: Coverage = (Annual income × years to replace) + Outstanding debts + Future obligations - Existing assets
Example: $100,000 income, 15 years to replace (until youngest child is 18), $250,000 mortgage, $50,000 in other debt, minus $100,000 in existing savings. = ($100,000 × 15) + $250,000 + $50,000 - $100,000 = $1,500,000 + $300,000 - $100,000 = $1,700,000
The shortcut: 10-12x your annual income covers most families. On $100,000 income, that is $1,000,000-$1,200,000.
What to buy: Term life insurance. A 20-year term policy for $1,000,000 costs roughly $40-$80/month for a healthy 30-35 year old. This covers the critical years when your family depends on your income.
What NOT to buy: Whole life, universal life, or variable life. These products combine insurance with an investment component, and they cost 5-10x more than term for the same death benefit. The investment returns inside whole life policies are poor (2-4% typically). Buy term insurance and invest the premium savings separately — you will come out far ahead.
Run Your Numbers
Enter your income and debts to see your coverage gap.
Life Insurance Needs Calculator
You are significantly underinsured. A term life policy for $900,000 would close the gap.
Who Does NOT Need Life Insurance
- **Single with no dependents:** No one depends on your income. Skip it.
- **Wealthy enough to self-insure:** If your investment portfolio can replace your income indefinitely, you do not need insurance.
- **Retired with sufficient assets:** Your earning years are over. Your spouse's needs are covered by retirement savings and Social Security survivor benefits.
- **Children:** Children do not earn income. Child life insurance is almost never needed (and is often a sales tactic).
What to explore next
- →How do I shop for term life insurance?
- →When should I review my life insurance coverage?
- →Do I need disability insurance too?
Frequently Asked Questions
Should both spouses have life insurance?
Yes, if both contribute financially or provide essential services (childcare, home management). Even a non-working spouse provides services worth $30,000-$50,000/year in childcare, cooking, and household management. If that spouse dies, the surviving spouse needs money to replace those services.
What about life insurance through my employer?
Employer-provided life insurance (typically 1-2x salary) is a nice benefit but usually insufficient. It also ends when you leave the job. Buy your own term policy in addition to employer coverage — it is portable and typically cheaper when purchased while young and healthy.