Term Life Insurance

What It Is

Term life insurance is simple: you pay a monthly premium, and if you die during the term (usually 10, 20, or 30 years), your beneficiaries receive a lump-sum payout called the death benefit. If you outlive the term, the policy expires and there's no payout.

That simplicity is a feature, not a bug. No investment component, no cash value accumulation, no complex riders to understand. You're paying purely for the death benefit — which means premiums stay low.

Who Needs It

You likely need term life insurance if:

Anyone depends on your income (spouse, children, aging parents)
You have a mortgage or significant debts that would burden someone else
You want to ensure your family can maintain their lifestyle if something happens to you
You have young children and want to fund their future expenses

You probably don't need it if you're single with no dependents, have no significant debts, and have enough savings to cover your final expenses.

How Much Coverage

Common rules of thumb say 10-12x your annual income, but that's a rough estimate. A better approach is to add up:

Outstanding debts (mortgage, student loans, car loans)
Years of income replacement your family would need
Future expenses (college for kids, childcare)
Final expenses (funeral costs, typically $10-15K)

Then subtract existing savings, investments, and any employer-provided life insurance.

Try it: Our Life Insurance Needs Calculator walks you through this math step by step.

What to Look For

Level premiums: Your monthly payment should stay the same for the entire term. Avoid policies with increasing premiums.
Conversion option: The ability to convert to a permanent policy later without a new medical exam. You may never use it, but it's good to have.
Financial strength: Check the insurer's AM Best rating. You want A or better — this is a decades-long commitment.
No-exam options: If you're healthy, a fully underwritten policy (with medical exam) will usually be cheaper. No-exam policies are faster but more expensive.

Common Mistakes

Mistake #1: Buying whole life when term would do. Agents earn much higher commissions on whole life, so they're incentivized to push it. For most people in their 30s, term is the right call.

Mistake #2: Only insuring the higher-earning spouse. Both parents need coverage, even if one stays home. The cost of replacing childcare alone is significant.

Mistake #3: Relying solely on employer coverage. Group life insurance is great, but it typically caps at 1-2x salary and disappears if you leave the job. Supplement with an individual policy.

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