Life insurance replaces your income and pays your debts when other people depend on you. If nobody relies on your income or would inherit your debts, you may not need any. If they do, it can be one of the cheapest large protections you can buy, particularly while you are young and healthy.

How much life cover? The DIME method

A starting point for a conversation, not a verdict. Works in any currency.

Ignores inflation and investment returns on the payout.

Term and permanent cover

Term life covers you for a set period, such as 10, 20 or 30 years. If you outlive the term, it ends with no payout. It costs the least per unit of cover. Whole life and universal life are permanent, with a cash value that grows over time. They cost far more for the same death benefit, and they may suit specific estate or business needs. For most families trying to protect income during working years, term does the job. Ask any agent what commission they earn on each product.

How much cover: the DIME method

DIME adds Debts, Income to replace, Mortgage and Education costs. Subtract savings and any existing cover. It is a starting point, not a verdict. Do not forget the value of a stay-at-home parent, whose childcare and household work would be costly to replace.

What affects the price

Age, health, tobacco use, family medical history, occupation, hobbies, term length and cover amount. Many policies involve a medical exam or health records. Accelerated and no-exam options are faster, though they sometimes cost more. Answer every question truthfully, since misstatements can threaten a claim later.

Buying checklist

  • Compare several insurers through an independent broker or quote site, and check their financial strength ratings.
  • Match your term length to your longest obligation, such as a mortgage or until the youngest child is independent.
  • Check whether it is convertible to permanent cover without another medical exam.
  • Name primary and contingent beneficiaries, and update them after marriage, divorce or a birth.
  • Do not cancel an old policy until the new one is active.
  • Tell your family that the policy exists and where to find it.

Group life insurance at work is a useful extra, but it often ends when you leave the job, and it may not be enough on its own.