How much coverage does your family actually need? 2025 Edition
A common rule of thumb is 10–12× your annual income. However, a more accurate method (DIME: Debt, Income, Mortgage, Education) adds up your debts, years of income replacement needed, mortgage balance, and children's education costs, then subtracts existing savings and coverage. Our calculator uses this method.
Term life insurance provides coverage for a set period (10, 20, or 30 years) and is significantly cheaper. Whole life insurance is permanent, builds cash value, and costs 5–15× more per month. For most families, term life offers the best value — buy a 20-year term while your children are young and mortgage is active, then reassess.
A healthy 35-year-old can get a $500,000 20-year term policy for approximately $25–$35/month. Rates increase significantly with age, tobacco use, and health conditions. At age 45, the same policy may cost $50–$80/month. Whole life for the same coverage typically runs $300–$600/month.
Group life insurance from your employer typically provides 1–2× your annual salary — far less than the 10–12× recommended. It's also not portable: if you leave the job, you lose the coverage. Enter your employer coverage in the 'Existing Coverage' field to see your remaining gap.
If you have no dependents and no co-signed debts, you may need little or no life insurance. However, buying a small policy young locks in low rates for the future. If you plan to have a family within 5–10 years, getting covered now is usually cheaper than waiting.
A policy is only as good as the paperwork behind it. Every year, insurers hold unclaimed or delayed death benefits because of avoidable errors in how the policy was set up — not because coverage was denied.
Naming your estate instead of a person. If no living beneficiary is named, the payout often defaults to your estate, which forces it through probate — a public, months-long court process that can also expose the money to creditors. Name a specific person or a trust instead.
Forgetting to name a contingent beneficiary. If your primary beneficiary dies before you (common with spouses of similar age) and no backup is listed, the same probate problem happens. Always list at least one contingent beneficiary.
Naming a minor child directly. Insurers cannot pay a lump sum directly to a minor. Without a named custodian or trust, a court will appoint one — often at a cost and without your input on how funds are managed. Setting up a simple minor's trust or UTMA custodian at the time of application avoids this entirely.
Never updating beneficiaries after divorce or remarriage. A beneficiary designation is a binding legal instruction that overrides your will. Divorced policyholders have had payouts go to an ex-spouse simply because the form was never updated — courts generally honor whatever is on file with the insurer, regardless of intent.
Review your beneficiary designations every 2–3 years or after any major life event: marriage, divorce, a new child, or the death of a named beneficiary. It takes five minutes with your insurer and prevents the single most common reason payouts get delayed.