Life Insurance Planning

Life insurance is not about putting a price on a person’s life. It is about protecting the people who depend on your income or unpaid work if you were no longer here. This lesson helps you decide if you need life insurance and, if so, how to think about the amount.

Life insurance is most important if:

• Someone depends on your income (children, partner, family). • You share debts or a mortgage with someone who could not afford the payments alone. • You provide major unpaid care or work that would be costly to replace (like full-time caregiving).

You might need **little or no** life insurance if:

• You have no dependents and no one relies on your income. • Your assets are already enough to support dependents long-term.

The key question: “If I died tomorrow, who would struggle financially, and for how long?”

Two major categories:

• **Term life insurance:** – Covers you for a set period (e.g., 10, 20, or 30 years). – Generally offers higher coverage for lower premiums. – Often a good fit for income replacement during working years.

• **Permanent life insurance (whole, universal, etc.):** – Intended to last your entire life. – Usually much more expensive per dollar of coverage. – Includes a savings or cash value component with complex rules.

Many families find that simple term life insurance meets most of their protection needs at a reasonable cost.

There are several rules of thumb, but here’s a simple approach:

1. Estimate how many years your dependents might need financial support. 2. Multiply your annual income (or the amount you want to replace) by those years. 3. Add any major debts or future expenses you want to cover (like a mortgage or education), then subtract savings and existing life insurance.

This won’t produce a perfect number, but it gives a starting point for conversations with a trusted advisor or planner.