The basic life insurance that comes with a typical job pays about one year’s salary or a flat $20,000, and it usually ends when the job does. If anyone depends on your income, work out what they would need without it and buy your own term policy to cover that amount.
LIMRA, the life insurance industry’s research association, found that 57% of adults whose only life insurance comes through work think it’s enough. The median basic benefit it reports is one times salary or a flat $20,000.
Compare that with what your paycheck pays for. If the payout earns only enough to keep up with inflation, replacing a $70,000 income for 15 years and paying off a $250,000 mortgage takes $1.3 million, before a dollar goes to college. A $70,000 work policy covers about 5% of that $1.3 million.
The coverage also belongs to the job. Quit, get laid off, or retire, and it usually ends. Most plans let you convert to an individual policy, but only within a short window, often 31 days, and at a premium based on your age at the time.
Run your own number the same way. Multiply your salary by the years your family would rely on it, usually until your youngest is on their own. Add your mortgage, other debts, and any college you plan to pay for, then subtract your savings. Leave the work policy out of the math, since it can disappear with the job. Cover that number with an individual term policy that runs at least as long as those years.
Pick a level term policy, which keeps the same premium for the whole term. Your age and health when you apply set that premium, so buying sooner usually costs less. Supplemental coverage through work is the easy alternative, often with no medical questions up to a set amount. Its price usually steps up every five years, though, and it stays tied to the job unless the plan lets you take it with you.
Anything the work policy pays on top of your own coverage is a bonus, and your family’s plan no longer depends on keeping the job.
Compare the best term life insurance companies for a policy that covers the amount you worked out.
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