Term Life vs. Whole Life - which is better?

For 95% of families, Term Life is superior. It offers high coverage for a low price (e.g., $500k for $30/month) during the years you need it most (kids growing up, mortgage). Whole Life is 10-15x more expensive because it bundles insurance with an investment component, which often has high fees and lower returns than buying Term and investing the difference.

Should I rely on my employer's life insurance?

No. Employer policies (Group Life) are usually capped at 1-2x salary, which isn't enough. More importantly, they are not portable—if you lose your job or switch companies, you lose the coverage. Always have your own private policy that stays with you regardless of employment.

At what age should I get life insurance?

The best time is when you are young and healthy, even if you don't have dependents yet. Rates are locked in based on your age at application. A 30-year-old might pay $25/month for a 30-year term, while a 45-year-old might pay $80/month for the same coverage. Locking in a rate early saves thousands over the policy life.

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Life Insurance Calculator

Estimate the life insurance coverage you need for your family.

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Annual Income ($)

Years of Income Replacement

Mortgage Balance ($)

Other Debts ($)

Final Expenses ($) Funeral, medical bills, etc.

College Fund per Child ($)

Number of Children

Current Savings/Assets ($)

Results

💡 The "DIME" Method: Why 10x Income Isn't Enough

Many agents say "buy 10x your income." That's lazy math. If you make $80k, $800k sounds like a lot. But if you have a $400k mortgage and two kids needing college ($100k each), that leaves only $200k for income replacement—which lasts your family just 2.5 years.

The Better Way (DIME):
Debt (Credit cards, student loans)
Income (Salary × Years needed, usually until youngest child is 22)
Mortgage (Pay it off completely)
Education (College costs per child)

🎯 Expert Tip: "Buy Term and Invest the Difference"

Don't mix insurance with investing. Whole Life insurance is expensive (often 10x cost of Term) and has high fees.

Strategy: Buy a cheap 20-30 year Term policy to cover your working years. Take the money you save (vs. Whole Life premiums) and invest it in a Roth IRA or 401(k). By the time the Term policy expires, your investments should have grown enough that you are "self-insured."

— David Chen, CFA | "I've seen families paying $400/month for a $200k Whole Life policy when they could get $1 Million in Term coverage for $40/month."

⚠️ Common Life Insurance Mistakes

Relying on Work Policy: Employer coverage (usually 1x salary) is not enough and disappears if you lose your job. Always own a private policy.
Waiting Too Long: Rates rise with age. Buying at 30 is significantly cheaper than at 40. Lock in a 30-year rate while you're young and healthy.
Underestimating Inflation: $500k today won't buy $500k worth of goods in 20 years. Pad your coverage by 10-20% to account for inflation.
Forgetting the Stay-at-Home Parent: If a stay-at-home spouse passes, you'd need to pay for childcare, cooking, cleaning, etc. Insure them for at least $250k-$500k.

📊 Real-World Scenario: The "Young Family" Gap

Scenario: John (35) earns $80k, has a $350k mortgage, and 2 kids (ages 2 & 4).

Employer Policy (1x): $80,000 coverage.
Actual Need (DIME):
- Debt/Mortgage: $360k
- Income (until youngest is 22 = 20 years): $80k × 20 = $1.6M
- Education: $100k × 2 = $200k
- Total Need: ~$2.16 Million

🚨 The Gap: He is underinsured by over $2 Million. If he passes, his family loses the house within 2 years. A $2M Term policy would cost him ~$60-80/month.

Reviewed by David Chen, CFA

Chartered Financial Analyst | Last Updated: November 2025

❓ Frequently Asked Questions

How much life insurance do I really need?

DIME method is best: Debt + Income (10-15 years) + Mortgage + Education. For most families with a mortgage and kids, 10-12x annual income is a safe baseline.

Term Life vs. Whole Life?

Term Life is best for 95% of people. It's affordable protection for the years you need it (kids, mortgage). Whole Life is expensive and complex; usually, you're better off buying Term and investing the difference.

Is employer life insurance enough?

Almost never. It's usually capped at 1-2x salary and isn't portable (you lose it if you leave the job). Treat it as a small bonus, not your safety net.

Does a stay-at-home parent need insurance?

Yes. If they pass, the surviving partner would need to pay for childcare, housekeeping, cooking, etc. A $250k-$500k policy is recommended to cover these replacement costs.

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