The short answer
This guide answers the most common questions about term vs universal life.
Too little coverage leaves your family short. Too much costs money every month. The right amount sits in between, and you can find it with a short checklist.
Here is how to work out how much term life insurance you need.
Part of our complete guide: Term Life Insurance: The Complete Guide.
Quick answer
Count debts, the mortgage, years of income and future costs. Subtract savings and existing coverage, including group life at work. Use separate policies if needs end at different times.
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On this page
- Term vs universal life: how much term life parents need
- Term life vs mortgage protection: what happens when term life expires?
- Term life vs return of premium: what is a term life ladder?
- Term life coverage amount: what affects the cost of term life insurance?
- How to compare the options fairly
- A worked example
- Riders worth knowing about
- Is term life right for you?
- Frequently asked questions
Term vs universal life: how much term life parents need
For parents, term life insurance answers one question: if my income stopped, how would my family keep going? The policy can pay the mortgage, daily costs, child care and future school costs.
- Cover both parents, including a stay-at-home parent. Replacing child care and household work costs real money.
- Pick a term that lasts until the youngest child is on their own.
- Name a trust or custodian for minor children rather than naming them directly.
Term life vs mortgage protection: what happens when term life expires?
Outliving your term is the good outcome. It usually means the mortgage is paid and the children are grown. If you still need coverage, plan a year or two before the end date so you have time to convert or compare.
Compare rates from several carriers in about two minutes. Free, no obligation.
Term life vs return of premium: what is a term life ladder?
Laddering means buying two or more term policies with different lengths instead of one large policy. For example, a 30-year policy for the mortgage and a 20-year policy for raising children.
Your total coverage is highest when your family needs it most, then steps down as debts shrink and children grow up. That can cost less over time than one big policy for the longest term.
Tip: Laddering works best when each policy has a clear job. Write down what each one is for.
Term life coverage amount: what affects the cost of term life insurance?
Term life pricing comes down to risk and time. Your age, health and habits describe the risk. The amount and term describe how much and how long the insurer is on the hook.
Two practical tips: buy when you are younger, and compare carriers. Insurers judge the same health history differently, and that can move your rate class.
How to compare the options fairly
- Compare the same coverage amount and term length.
- Check what happens at the end of the term: renewal, conversion or nothing.
- Look at the carrier's financial strength rating.
- Ask about riders included at no cost versus ones that add to the price.
How to get covered in 3 steps
- Check your rate. Pick your state and answer a few quick questions about the coverage you want.
- Compare carriers. A licensed agent compares term life insurance options from several insurers and explains the trade-offs.
- Apply and get covered. Many applications take one phone call. Coverage starts once the policy is issued and the first premium is paid.
A worked example
Say you're 34 with a $150,000 mortgage balance and 16 years left, $19,000 in other debts, and an income of $55,000. Here's one simple way to size coverage:
| Item | Amount |
|---|---|
| Mortgage balance | $150,000 |
| Other debts | $19,000 |
| 4 years of income | $220,000 |
| Total to consider | $389,000 |
In this example, a 20-year term would outlast the loan (it ends around age 54). Your own numbers will differ; use this as a starting point and adjust for savings, other coverage and future costs like school.
Riders worth knowing about
A rider is an option you add to a policy. Some are built in at no extra cost, others add to the premium. Availability and terms vary by carrier and state, so check the details of any policy you consider.
- Accelerated death benefit. Lets you access part of the benefit early if you are diagnosed with a terminal illness, and on some policies a chronic or critical illness.
- Waiver of premium. Keeps the policy in force without payments if you become totally disabled, as defined in the policy.
- Return of premium. Refunds premiums you paid if you outlive the term and the policy stays in force. It costs more.
- Child rider. Adds a small amount of coverage for your children under your policy.
Riders are useful, but each one adds cost or complexity. Pick the ones that fit a real worry, and skip the rest.
Is term life right for you?
Often a good fit
- you have a need with an end date and want the most coverage for the money.
- you want to cover a mortgage, income or debts.
Maybe not the right fit
- you want coverage that never expires.
- you want a policy that builds cash value.
