You need life insurance if anyone depends on your income or if you have financial obligations others would inherit when you die. Life insurance replaces lost income, pays off debts and covers final expenses for your dependents.
Three situations call for life insurance:
- Someone depends on your paycheck, like a spouse, a child or an aging parent who couldn't absorb the loss of your income.
- You carry debt that wouldn't die with you: a mortgage, a business loan or a cosigned obligation a surviving co-borrower would inherit.
- You want your death to accomplish something specific like covering funeral costs that run $7,000 to $15,000 or leaving money behind for someone.
If none of those apply a policy adds cost without purpose.
Three questions help clarify where you stand:
- Would anyone face a financial shortfall if your income stopped tomorrow? Multiply your annual earnings by 10 to 12. That's the minimum coverage you should aim for.
- Do you carry debt that would land on someone else? The right coverage amount matches the full balance.
- Are you trying to fund something specific after you're gone, like a child's education, a trust, a business buyout? That typically points to permanent coverage with a cash value component.
If you answered yes to any question, you need coverage. The amount and type depend on your specific situation.
