How much life insurance do I actually need?

For most people, the answer is term insurance, for about as long as you have a mortgage and kids at home, and probably less of it than you have been told. That covers roughly eight out of ten people who ask this question.

To get to your number, start with what the money has to do. Pay off the mortgage so your family keeps the house. Replace enough of your income to keep the household running while the kids are still at home. Maybe cover some of college, if that matters to you. Add those up and you have a figure that means something, instead of one a sales calculator produced.

Then match the length of the policy to the length of the need. Term insurance covers you for a set stretch of years, twenty or thirty typically, and costs a fraction of what permanent insurance does. The years that need covering are the mortgage years and the kid years. Once the house is paid down and the kids are supporting themselves, the need shrinks, and the policy can end without anything bad having happened.

There are real cases where it gets more complicated. If you own a business, if someone in your family will need care for the rest of their life, or if there is an estate question, the simple answer above does not fit and you should have a longer conversation with someone qualified to have it.

But if none of that describes you, this is a fifteen minute decision. Buy enough term coverage to do the jobs on your list, for the years those jobs exist, and be wary of anyone who makes it more complicated than that.