Most employer-provided life insurance covers one to two times your annual salary. The guideline is 10-12 times your income to replace earnings and cover debts, childcare, and future expenses for dependents. Supplement your employer coverage with a personal term policy you own, one that doesn’t disappear if you change jobs.
That free policy from HR feels like protection. It enrolls automatically, it appears on your benefits summary, and it lets you mentally file life insurance under handled. The math disagrees.
Say you earn $70,000 and carry coverage at twice your salary. Your family gets $140,000, which sounds meaningful until you subtract a funeral, a few months of catch-up bills, and a year of mortgage payments. The money runs out before your kids change schools. The 10-12 times guideline exists because a paycheck takes decades to replace, and the payout has to clear debts, fund childcare, and bridge those lost earning years.
There’s a second flaw. The policy belongs to your job, not to you. Quit, get laid off, or retire, and the coverage ends with your badge access. If your health has slipped by then, replacing it on your own gets expensive or impossible. The supplemental coverage your employer sells usually works the same way, and its rates climb in five-year age bands.
Start with the gap. Multiply your income by 10 to 12, then adjust: more if the mortgage is large or college is coming, less if your spouse earns well or the kids are nearly independent. Subtract what your employer provides. The remainder is the policy you buy yourself. Price 20- and 30-year level term while you’re healthy. A 30-year-old in good health can lock in $500,000 of 20-year coverage for roughly $25 to $30 a month, and the premium stays flat for the entire term.
Keep the free coverage from work as a bonus on top of a real plan. Just never let it be the plan.
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