How Much Life Insurance Do I Need, And What Kind?Life Insurance That Protects Today And Passes On Tomorrow.
Coverage sized to what your family would need, in the type that fits how long you need it. Maartin explains term, whole and universal life plainly, including what each costs over the years.
The Short Answer
Life insurance comes in two basic types. Term life covers a set number of years and pays only if you die in that period. Cash value policies, such as whole and universal life, can last your whole life and build cash value. The right amount depends on your income, debts, dependents and what you want to pass on.
Source: California Department of Insurance
Three Numbers Worth Knowing
- 10 To 30 Days
- California’s free look window to return a new individual life policy for a full refund. Seniors get at least 30 days.
- 1 To 2 Years
- How long a new policy can stay contestable, when the insurer may deny a claim over errors on your application.
- $15 Million
- The 2026 federal estate tax basic exclusion amount per person, set by law in July 2025.
Source: California Department of Insurance and IRS.gov
Two Basic Types
Term Life Or Cash Value Life Insurance?
California’s Department of Insurance describes two basic types. Here is how they answer the questions families ask.
| Question | Term LifeCoverage For A Set Number Of Years | Cash Value LifeWhole And Universal Life |
|---|---|---|
| How Long It Lasts | The period you choose. If you outlive it, no benefit is paid. | Usually your whole life, as long as the premiums are paid. |
| Cost Over Time | Lower to start. The cost rises as you get older and renew. | Higher in the early years. The extra builds cash value inside the policy. |
| Cash Value | As a rule, none. Term pays a death benefit only. | Grows over time and can secure a loan at the rate the policy sets. |
| Flexibility | Some policies convert to cash value coverage up to a stated age, with no medical exam. | Universal life lets you change or skip premiums, or change the death benefit, more easily than other types. |
| If You Stop Paying | The policy generally lapses with no cash value. | Surrendering early can bring substantial charges; nonforfeiture options set what happens to the cash value. |
| Common Uses | Replacing an income while children are home or a mortgage is unpaid. | Lifelong needs such as estate costs, a legacy or funding a business buyout. |
Maartin compares what each type costs over the years you actually need coverage, using each policy’s guaranteed values.
Why Families Buy It
Six Jobs Life Insurance Can Do.
The California Department of Insurance lists reasons like these. Each one sets its own amount and its own length of coverage.
- Replace An IncomeProtect a spouse or children who rely on your paycheck or your pension.
- Pay Off The HouseClear a mortgage or other debt so your family can keep the home.
- Pay Estate CostsGive heirs cash for estate taxes and final bills, so property can stay in the family.
- Fund A Business BuyoutGive a surviving partner the money to buy out an owner’s share. See business owner planning.
- Leave A LegacyPass a set amount to children, grandchildren or a cause, generally free of federal income tax. See legacy planning.
- Cover Final ExpensesPay for a funeral and the bills that arrive in the months afterward.
Before You Buy Or Replace
Four Things To Know About Any Policy.
These rules come from the IRS and California’s Department of Insurance, and they apply whichever company issues the policy.
The Payout Is Generally Income-Tax Free
The IRS says life insurance proceeds paid to a beneficiary generally aren’t included in gross income. Interest added to the payout is taxable.
A New Policy Starts A Contestable Period
For one or two years, the insurer can cancel the policy or refuse a claim over omissions or mistakes on your application. Answer every question fully.
Replacing A Policy Restarts The Clock
A new policy can bring a new contestable period and new surrender charges. California requires full disclosure of the benefits and drawbacks first.
You Have Time To Review It
California gives you 10 to 30 days to return a new individual life policy for a full refund, and seniors at least 30.
Working With Maartin
How Maartin Sizes Your Coverage.
- 01
List Who Depends On You
A spouse, children, a business partner or an heir. Each need gets its own number and its own time frame.
- 02
Count What’s Already There
Savings, pensions, Social Security survivor benefits and policies you already own all reduce what new coverage has to do.
- 03
Match The Type To The Time
Needs that end, like a mortgage, suit term coverage. Needs that last a lifetime suit cash value coverage.
- 04
Compare Cost Over The Years
Maartin shows what each option costs over the years you need it, based on the policy’s guaranteed values.
Estate and trust documents stay with your attorney, and Maartin works alongside them.
Questions
Common Questions
How much life insurance do I need?
Enough to cover what your family would need without you, minus what they would already have. Maartin adds up the income to replace, debts, future costs and estate expenses, then subtracts savings and existing coverage. The Department of Insurance warns that buying too much can strain a budget just as buying too little can.
Should I buy term or whole life insurance?
It depends on how long you need the coverage. Term costs less at first and covers a set number of years. Whole life lasts for life and builds cash value, at a higher premium. Some term policies can convert to cash value coverage later without a medical exam.
Is a life insurance payout taxable?
Generally, no. The IRS says proceeds paid to a beneficiary because of the insured’s death generally aren’t included in gross income. Interest paid on the proceeds is taxable, and a policy bought from someone else follows different rules, so check with your CPA.
What happens if I stop paying premiums?
A term policy generally lapses with no value. A cash value policy has nonforfeiture options, which let you choose how the cash value is used if the policy is surrendered or lapses. Your policy lists them.
Should I replace an old policy with a new one?
Compare first. A new policy can restart the contestable period and surrender charges, and your current insurer may let you amend or convert your policy without losing rights or cash value. California requires full disclosure of the benefits and drawbacks before any replacement.
Can life insurance help with estate taxes?
It can give heirs cash to pay estate taxes and final bills. For 2026 the federal basic exclusion amount is $15,000,000 per person. Your attorney and CPA work out whether your estate could owe, and life insurance can also help pay for long-term care through a hybrid policy.
Protecting Your Family?
Coverage Sized
To Your Family.
Bring your current policies and a sense of who depends on you, and see the amount and type that fit.
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