Before You Buy Life Insurance: A Checklist

Start with one question

Who would be in financial trouble if your paycheck stopped tomorrow?

If the answer is "no one," meaning no dependents, no shared debt, and enough savings to cover what you'd leave behind, you may not need life insurance at all, or not much. When the answer is a partner, kids, a co-signed mortgage, or aging parents, that's who the policy is for. Everything else is detail on top of that.

Figure out how much (two ways)

There's a quick way and a better way.

The quick gut check: 10 times your annual income. Make $60,000, start around $600,000. Fast, rough, fine for a first number.

The better way is DIME. Add up what you'd actually be leaving behind:

• Debt: credit cards, car loans, anything that doesn't vanish when you do
• Income: your annual income times the number of years your family would need it
• Mortgage: the full payoff on your home
• Education: what it'll cost to get your kids through school

Add those four and you get a number tied to your real obligations, not a generic multiple. Subtract savings or other coverage you already have.

Pick a term that outlasts the need

If you go with term, the length matters more than people realize. A good rule: the term should run at least until you retire, and at least until your longest obligation ends. That's usually the year your youngest finishes college or the mortgage is paid off. A 15-year policy that expires while you still have a 12-year-old and 18 years left on the house leaves a gap exactly when you can least afford one.

Term or permanent: be honest about which you need

Two basic types, and they solve different problems.

• Term covers you for a set stretch (10, 20, 30 years) and pays out only if you die during it. Premiums start low, and it builds no cash value. It's built for a need that ends: while the kids are home, while the mortgage is alive.
• Permanent (whole life, universal, variable) covers you for life and builds cash value over time. It costs more for the same death benefit, often several times more.

So this is where it lands. If your need is temporary, term usually does the job for far less money, and most people with young families fit that description. Permanent makes sense for needs that don't expire: lifelong dependents, estate planning, a deliberate place to build cash value. It's not a default. Don't buy permanent because someone framed term as "throwing money away." Buy the one that matches your actual need.

Before you sign

• Get quotes from more than one insurer. The same health profile can price very differently. Compare at least a few. One thing the quote tools won't spell out: that advertised price is an estimate, not an offer. Your real rate isn't locked until underwriting finishes and the insurer has seen your actual numbers, so treat the first figure as a starting line, not a promise.
• Check the insurer's financial strength. You're buying a promise to pay decades from now. Look up the company's rating from an agency like AM Best before you commit.
• Be completely honest on the application. Misstating your health or habits can give the insurer grounds to deny a claim later. The cheaper premium isn't worth a denied payout.
• Name your beneficiaries, and keep them updated. This is what the whole policy comes down to, and it's the thing people forget after a divorce, a birth, or a death.
• Know which riders you're paying for. Add-ons like waiver of premium or an accelerated death benefit can be useful; others are filler. Ask what each one costs and does.

The safety net most people don't use

Every state, plus D.C., gives you a free-look period, usually 10 to 30 days after the policy is issued. During that window you can cancel for any reason, or no reason, and get every dollar of premium back. If something feels off after you read the actual policy, that's your out. Use it.

Your before-you-buy checklist

1. Name who depends on your income.
2. Run a DIME number; sanity-check it against 10× income.
3. Choose a term length that outlasts your mortgage and your kids' schooling.
4. Decide term vs permanent based on whether the need ends.
5. Pull quotes from 2-3 insurers and check each one's financial-strength rating.
6. Answer every health question truthfully.
7. Set your beneficiaries, then calendar a review after any big life change.
8. Read the policy during the free-look window before it's final.

FAQ

Related: How Much Life Insurance Do You Need? · Term vs Whole Life · How to Compare Life Insurance Quotes

This article is for general educational purposes only and is not insurance, tax, or legal advice. Cove does not sell insurance and is not affiliated with any insurer. Any figures are illustrative and vary by policy, carrier, and state. Confirm specifics with your carrier and a qualified tax or legal professional. Last updated June 2026.