Life Insurance: How Much and What Kind

The story: Who counts on whom?

Ana and Marcus sit in their living room with their young child and talk through how long their family would need life insurance.

1. Narrator: Ana and Marcus have a 4-year-old. Ana works full time. Marcus stays home with their child.
2. Ana: I have life insurance through work. Marcus doesn’t earn a paycheck, so Marcus doesn’t need any, right?
3. Narrator: Marcus’s work at home has real value. Paying for childcare and household help would cost a lot.
4. Marcus: And if Ana changes jobs, the work policy may not come along.
5. Narrator: Most families cover the years people depend on them with term insurance. It’s simple and costs far less than permanent coverage.
6. Ana: Then we size it for both of us, for the years until our youngest is grown.

What you’ll learn

1. Who needs it

   Anyone whose income or work at home others depend on. That includes a parent who stays home, since paying for childcare and housework costs real money. A single person with no one depending on them often needs little or none.

2. How families size it

   Start with income for the years people depend on you, plus debts and goals like college. Subtract savings and the Social Security survivor benefits young children and a parent caring for them could get. What’s left is the gap to cover.

   Example: $800,000 of need − $100,000 of savings − $150,000 of survivor benefits = a $550,000 gap.

3. Term or permanent

   Term life covers a set number of years, like 20 or 30, for a low price. Permanent life lasts your whole life and builds cash value, but costs much more. It has special uses, like some estate plans. Many families match the term to when their youngest grows up.

4. Buy while you’re healthy

   The price depends on your health when you apply, and a health change can raise it or block coverage. Workplace coverage is handy, and for some people it’s the only option, but it may not follow you to a new job.

Key words

term life

life insurance that covers a set number of years

permanent life

life insurance that lasts your whole life and costs more

Also called: whole or universal life

cash value

savings built inside a permanent policy

beneficiary

the person named to get the money

Common questions

How do I find my Social Security survivor benefits?

Your Social Security account shows estimates. The fact card links to who can get survivor benefits.

Is life insurance through work enough?

Sometimes, but it’s often a small amount and may end when you leave the job. Many families add a term policy of their own.

Remember this

Cover the years people depend on you, usually with term.

Try it: List your life insurance

1. List each life policy you have, including any through work.
2. Write down the beneficiary for each one.
3. Note when each policy ends.

The whole mission; no account or app needed.

Live facts

Numbers that change over time, with when they were last checked and where they come from.

• Who can get Social Security survivor benefits

  Source: SSA.gov(opens in a new tab)

• Check an insurer with your state insurance department

  Source: NAIC(opens in a new tab)