When our kids were born, my wife and I each got 30-year term policies, sized to cover the years our income actually matters most, the years our kids are dependent on it. That's the whole idea behind term life insurance, and it's simpler than the insurance industry makes it sound.
Why term, not whole life
Whole life insurance bundles life insurance with an investment component and lasts your entire life. It's expensive, and the investment portion is usually a mediocre one compared to just investing the difference yourself. Term life insurance is pure insurance: you pick a coverage amount and a length of time, and if you die during that term, your beneficiaries get the payout. If you don't, the policy simply ends. No payout, no refund, and for most families, no need for one.
The reason this trade works in your favor is math, not sentiment. Term is dramatically cheaper than whole life for the same coverage amount, because you're only insuring the years you actually need covered, not your entire life. Invest the difference in cost instead, and you generally come out ahead of what the whole life policy would have built anyway.
How much coverage
The goal isn't a round number that sounds big. It's replacing what your income would have provided. A common way to think about it: enough to cover remaining years of income your family depends on, plus specific costs like paying off a mortgage or funding college, minus assets you already have that could cover part of that gap.
- Years of income your family would need replaced
- Debts you'd want paid off, a mortgage especially
- Future costs you want funded regardless, college being the obvious one
- Minus savings and other coverage you already have
For a lot of families with young kids and a mortgage, this adds up to a multiple of annual income, often somewhere in the range of 10 to 15 times, though the right number depends entirely on your specific numbers, not a rule of thumb.
The better question isn't how much insurance you can afford, but how many years of your income your family actually depends on, and how much it would take to replace that.
How long a term
This is where sizing the term to your kids matters. A 30-year term taken out when your kids are young roughly covers them through college and into early adulthood, the stretch where your income is doing the most work supporting them. By the time the term ends, ideally the mortgage is smaller or paid off, the kids are grown, and you've built enough on your own that a payout isn't the thing standing between your family and financial trouble anymore.
That's the target: pick a length that expires around the same time your family's dependence on your income naturally winds down.
Term life insurance is inexpensive, straightforward, and does 1 job well: replacing your income if you're not there to earn it. Size the coverage to what your family would actually need replaced, and size the length to the years your income matters most. Skip the whole life sales pitch. Invest the difference instead.