However, if you're young, single, and don't have any dependents, Steuer advises you hold off on purchasing life insurance. "You can't predict the future. You don't necessarily know how many kids you're going to end up with, or even if you are going to get married," he says. Nonetheless, some experts recommend buying life insurance as a young single person, due to low costs and the ability to get a 30-year term that you'd have in place for when you have kids.
So you purchase a term insurance policy to cover your spouse or your kids, but then what? Once the kids grow up, most people can let the policy expire, advises Bill Wixon, a certified financial planner with Wixon Advisors in Maple Grove, Minn. "After your kids are through college, your other assets should be built up enough that you no longer need the life insurance," Wixon says.
In terms of how much life insurance you need, there are varying schools of thought. Some financial advisers say you should insure five to seven times your salary, while others will say you need more. Wixon believes a good rule of thumb is three times your income plus debt. "A lot of the life insurance salesmen use these huge factors of 15 to 20 times your income, where almost everyone needs more than $1 million," he says. "They're just doing that to sell more insurance, in my opinion."
It's hard to come up with a magic number because your needs can change from year to year. As Steuer says, "Financial planning is always a moving target."