Term Life Insurance Explained: How Much Coverage Do You Need?

If someone depends on your income, you need life insurance. But most people either have the wrong type, the wrong amount, or pay too much for it. Term life insurance is the simplest and most affordable option for most people. Here's what you need to know.

What Is Term Life Insurance?

Term life insurance provides a death benefit for a specified period — 10, 20, or 30 years. If you die during the term, your beneficiaries receive the payout. If you outlive the term, coverage ends (you can renew at higher rates). It's pure insurance with no investment component.

Term vs Whole Life Insurance

Whole life insurance covers you permanently and builds cash value — but costs 5–15x more than term. For most people, term insurance plus investing the difference provides far better outcomes. The only exceptions are specific estate planning or business situations.

How Much Coverage Do You Need?

A common rule of thumb: 10–12x your annual income. A more precise method: calculate the amount your family would need to replace your income for 20 years, pay off debts (mortgage, loans), and cover future expenses (college, childcare). Subtract existing savings and assets.

How Much Does Term Life Insurance Cost?

• Healthy 30-year-old, $500,000 / 20-year term: ~$20–30/month
• Healthy 40-year-old, $500,000 / 20-year term: ~$35–55/month
• Healthy 50-year-old, $500,000 / 20-year term: ~$100–160/month
• Rates increase with age, health conditions, and smoking history

When to Buy

Buy term life insurance when: you get married, have a child, buy a home, or whenever someone depends on your income. The younger and healthier you are when you buy, the lower your rates — and rates are locked in for the term.