Most people overestimate the cost of life insurance by 300% or more. The cost varies based on your unique situation. The biggest factors that can affect your premium include your coverage amount, term length, age, health status, and tobacco use.

Employer-sponsored policies typically offer coverage that is about 1-2X your annual salary, which is a fraction of what most families need. And if you leave your job, that coverage usually ends. A common rule of thumb is to have 10X your salary in life insurance protection.

A common and easy way to come up with a coverage estimate is to multiply your annual income by 10. Another way is to calculate your long-term financial obligations and then subtract your assets. The remainder is the gap that life insurance needs to fill.

Term life insurance uses premiums to cover you for the determined “term” of the policy. Coverage expires if there is no claim within that time frame. Term life can be a good match for someone seeking affordable coverage to replace lost income over a critical period, such as while raising children or paying off a mortgage.Whole life insurance lasts your entire life if premiums remain current.