Life insurance is the most important financial product most people never fully understand. We change that with plain-English guides and real comparisons.
Term vs Whole Life Insurance
Term life insurance provides coverage for a specific period such as 10, 20, or 30 years and pays a death benefit if you die during that term. Premiums are fixed and much lower than whole life. Whole life insurance provides permanent coverage with a savings component called cash value that grows tax-deferred. Premiums are 8 to 10 times higher than term for the same death benefit. For most people with dependents and a mortgage, term life is the right choice.
How Much Life Insurance You Need
The outdated 10 times salary rule is a starting point not a final answer. A better approach is to calculate your DIME score by adding your total Debt, multiplying your Income by the years your family needs support, adding your Mortgage balance, and adding estimated Education costs for your children. Then subtract your existing assets. This gives you a more accurate coverage amount.
Types of Life Insurance
Term life is the most affordable and straightforward option. Whole life offers permanent coverage and cash value accumulation. Universal life offers flexible premiums and death benefits. Variable life allows investment of cash value in market subaccounts. Indexed universal life ties cash value growth to a market index. For most families a 20 to 30 year term policy with a death benefit of 10 to 15 times your income provides the right protection at the right price.
When to Buy Life Insurance
The best time to buy life insurance is as young and healthy as possible because premiums are based primarily on age and health. A healthy 30-year-old can get $1 million in 20-year term coverage for under $35 per month. That same policy at age 45 would cost $110 per month or more. Life events that trigger a review include getting married, having a child, buying a home, or starting a business.