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The purpose of life insurance is to provide your loved ones with financial security in the event that you pass away. But what type of policy is right for you and how much do you need? We're here to help answer these common questions so you can make a decision with confidence.

Who Needs Life Insurance?

Whether or not you need life insurance comes down to a single question: In the event of your passing, will you be leaving others at financial risk? While this type of insurance is often thought of as something primarily for those who are married and have kids, there are plenty of others who could benefit. You might be:

  • Single and have substantial assets
  • Someone's ex-spouse
  • The caretaker of an elderly or ailing family member
  • An employer or business partner

How to Choose a Life insurance Policy

The plan you choose will be based on 3 primary factors: how much insurance you need, whether the policy is permanent or term, and if you want the additional benefits of rider policies.

How much do you need?

The amount of life insurance you purchase should be enough to cover final expenses such as outstanding debts and funeral costs, while also including any extra funds you want to leave to your beneficiaries.

A general guideline of the industry is to take your annual salary and multiple it by 10.

However, since factors that affect insurance are unique to each person, the best way to figure out how much you need is by talking with an agent.

Another way to calculate what you might need is by determining how much overall income you want your family to receive each year. Once you've done that, take that number and subtract any other monetary sources, such as retirement savings, pensions, and Social Security. What's left is what's known as the shortfall, which is the number you'll want to cover with insurance.

It's a standard recommendation to choose a plan that's at least 10 times the annual shortfall, though it's best to purchase more if you can afford it.

Policy Types

Once you've figured out how much insurance you need, you'll have to decide what type of policy is right for you. Our guide to term and permanent insurance describes these in further detail, but the chart below can help you get a better idea of what sets these policies apart.

Term Life Insurance
Set for a specific amount of time and must be renewed for ongoing coverage
Intended for those who are younger and in good health
Protects against early death
Pays no benefit if death occurs after the policy
Doesn't increase in value over time
Lower premiums up front, but get more expensive with each renewal
Permanent Life Insurance
Only ends when the plan holder passes away or the policy is canceled
Good for anyone who can afford the premiums
If purchased when young and healthy, protects against higher premiums that come with older age
Guarantees death benefits, as well as additional funds from savings or investment accounts
Accrues value as you pay your premiums
Higher initial premiums that get locked in for the duration of the plan

Rider policies

Along with your primary insurance plan, you can opt to purchase rider, or add-on, policies for additional coverage in certain circumstances. Rider options vary depending on the company you choose, but some you might come across when doing your research include:

  • Accelerated death
  • Accidental death
  • Critical illness
  • Children's term
  • Disability income
  • Guaranteed insurability
  • Long-term care
  • Return of premium
  • Spousal
  • Transfer of insured
  • Waiver of premium

Learn more about how rider policies work, what they cover, and the additional peace of mind they can bring you.

What's next?

Ready to find life insurance? ConfidentQuotes offers an easy way to compare companies and policies based on your needs.

Find coverage, benefits, pricing, customer service, and more.