Most people overestimate the cost of life insurance by 300% or more. The cost varies based on your unique situation. The most important factors that can affect your premium include the amount of coverage, the duration of the term, age, health condition, and tobacco use. The sooner you buy, the sooner you will secure your lowest premium and save more money in the long run.

Employer-sponsored policies generally offer coverage of approximately 1-2 times your annual salary, which is only a fraction of what most families need. If you leave your job, that coverage typically ends. A general rule of thumb is to have 10 times your salary in life insurance protection, which is why many people purchase individual term life insurance policies to supplement their coverage through work.

A common and simple way to estimate coverage is to multiply your annual income by 10.Another method is to calculate your long-term financial obligations and then subtract your assets. The remaining amount represents the gap that life insurance needs to cover.

Term life insurance uses premiums to cover you during the specified "term" of the policy. Coverage expires if no claim is made within that period. Term life insurance can be a good option for someone looking for affordable coverage to replace lost income during a critical period, such as raising children or paying off a mortgage.

Whole life insurance lasts your entire life as long as premiums are kept up to date. Whole life policies also have the potential to accumulate cash value, depending on the policy. For these reasons, whole life premiums are typically higher than term life premiums for the same amount of coverage.

Your life insurance can help cover some of life’s biggest expenses if you pass away while the policy is in effect. For example, the policy payout is often used for mortgage payments, debts, tuition, and everyday expenses. Ultimately, it is up to your beneficiaries to decide how to use the payout. The proceeds are paid as a lump sum and are generally tax-free.