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When You Should Get Life Insurance and How Much You Need

Updated: Oct 13, 2020

Should you get life insurance? The short answer is, yes. Everyone should have life insurance. But you still need to decide what type of life insurance you need, and how much.

The way we approach it is like this: life insurance…is like an onion. Seriously. It’s all about the layers. Below we’ve explained when you should get life insurance, what type and how much you need.

First, we’ll explain the two primary types of life insurance:

Term Life Insurance: This is the simplest, most accessible insurance policy; it lasts a set number of years (usually 20-30 years) before it expires, in which case you can renew or choose a new policy. Term life insurance is also the most affordable, but the price increases the older you get.

Permanent Life Insurance: This one is a permanent policy, meaning it doesn’t expire. It has a death benefit and can possibly create cash value, which acts as a tax-deferred savings account included within the policy. It’s more expensive, and much like term life insurance, it gets even more expensive the older you are when you apply.

There are variations of permanent life insurance options as well, such as universal life insurance and variable life insurance. If you have questions about these options, give as a call us and we’ll walk you through it.

Now, On To Our Life Insurance Onion.

18 years old. Finally an adult. Time to add the first layer:

Life insurance is significantly cheaper when you’re young and healthy, so you want to lock in your lower rates as soon as possible. This first layer of insurance consists of an inexpensive term life policy, with usually $250,000 in coverage. It’s enough to cover final expenses plus any debt you may have, such as student loans. If you’re a non-smoker and don’t have a pre-existing condition, your policy could be as low as $10 per month.

30 to 35 years old. Making some big life moves and adding a couple more layers:

It may surprise you, but this is when you need the most life insurance coverage. This is because at this point in your life, you typically have the most to protect.

We recommend adding a layer of protection for every big life event; such as buying a house, getting married, or having children. These layers would again be term life policies with coverage amounts between $250,000 to $750,000.

When we say, “layers of protection,” that’s exactly what we mean. When you buy a house, you’re really taking out a 20- or 30-year loan. So, you should take out a 20- or 30-year term life policy to cover that debt. Now, should the unthinkable happen, your family won’t be left with the responsibility of paying for or selling your house.

When you get married, you and your spouse should each take out a term life policy with the goal of income replacement. Its value should be 15-20x your annual income, in case it needs to replace your income for a significant amount of time.

Having kids adds another layer of protection, and another term life policy. This policy will provide the things they need in case you aren’t able to do so. Think, college.

One more thing to do when you reach your 30s:

Since you already locked in a lower rate with your original term life policy, now is the time to convert that policy to a permanent policy. This is the policy that will stay with you through retirement, and you want to get it now, because the cost to convert increases every single year.

55 to 65 years old. Peeling back the layers:

As you approach age 65 and upcoming retirement, your need for life insurance goes down. Ideally, your house would be paid off, so that layer can drop away. The closer you get to retirement, the less you need income replacement, so that layer can drop off too. Once your kids are out of school and have policies of their own, those last "term policy layers" can finally drop away so that by retirement, you should be left with just your permanent policy.

Wondering about replacing a pension or covering health care costs? Call us about leveraging annuities and long-term care insurance.


Want to be a life insurance superstar? Well then, when you’re ready to have kids, call us about life insurance plans for children. These are inexpensive plans with lower coverage amounts, but they typically have some great features as your kids turn 18, such as automatically doubling in coverage.

Give us a call today (860) 785-4854 and we'll discuss what layer of life insurance you should be on.


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