Need comes from dependants
No dependants, maybe no need.
All tracks and lessons
Term versus whole life insurance
Term covers a set period at a lower cost; permanent policies add cash value at a much higher premium. Start with the need.
In this lesson you will
- Decide whether you need life insurance
- Compare term and permanent policies
- Estimate a coverage amount
Life insurance replaces income or covers debts for people who depend on you. If no one depends on your income, you may not need it.
Term life
Covers you for a fixed period, such as 20 or 30 years. If you die during the term, it pays the death benefit; otherwise it ends. Premiums are usually much lower than permanent insurance for the same coverage.
Whole and other permanent life
Lasts for life and builds cash value. Premiums are much higher, and policies can be complex, with fees and surrender charges if cancelled early.
How much coverage
- Years of income your dependants would need.
- Debts to clear, such as a mortgage.
- Future costs such as childcare or education.
- Minus existing savings and other coverage.
Read before you sign
Compare quotes for the same coverage and term, check the insurer’s financial strength rating, and understand any fees and surrender charges.
By the GetGuac team · Editorial policy
Three ideas to keep
Term matches temporary needs
Mortgage and child-raising years.
Permanent is complex
Read fees and surrender charges.
Do it in 4 steps
List who depends on you
And for how long.
Estimate the need
Income, debts, future costs.
Subtract what you have
Savings, workplace coverage.
Compare like-for-like quotes
Same amount and term.
A simple coverage estimate
Illustrative household with two young children.
| Item | Amount |
|---|---|
| Income replacement (10 years × $45,000) | $450,000 |
| Mortgage balance | $220,000 |
| Childcare and education fund | $80,000 |
| Minus savings and workplace coverage | −$150,000 |
| Coverage need | $600,000 |
A term policy lasting until the children are grown would match this temporary need.
Where this usually goes wrong
- Buying coverage without dependants
- Relying only on workplace coverage that ends with the job
- Buying permanent insurance without understanding fees
Estimate how many years your household would need your income replaced.
Tools and guides for this lesson
Quick quiz
1. Term life insurance…
2. Who usually needs life insurance most?
3. Permanent policies typically have…
0 of 3 answered
Puzzle
Income $50,000 for 12 years, mortgage $180,000, savings $70,000. Estimate the coverage need.
Show the answer
$710,000
$600,000 + $180,000 − $70,000 = $710,000.