How much life insurance to buy? Situations such as marital status, number of dependents, and earnings (and future potential earnngs) of each spouse. Not enough insurance coverage can spell financial disaster, while too much coverage may be a waste of money that could be better spend on other investments.

The life insurance industry’s rule of thumb is 10 times annual salary for an individual. Insurance aggregators offer calculators to figure life insurance needs as do insurance companies, banks and investment companies.

The goal is for people to withdraw less annually than their investment portfolio returns. This allows for inflation if the money is to support them for long periods. Many advisers recommend an annual withdrawal of 5 percent or less, which would be $50,000 in annual taxable income on $1 million.
Two basic varieties of life insurance:
Term insurance, which covers a set period of time, is cheaper.
Permanent insurance, which includes whole life and universal life, does not expire and is often used by wealthier individuals to pay estate taxes.

Where to buy life insurance:
Young people in excellent health should not automatically buy extra life insurance through their employers, specialists say, because it can be more expensive than what they could obtain directly through insurance providers than if they obtained a group discount rate with their employer. Older people, those in poor health or those looking for a convenient way to buy life insurance, could benefit from employer plans.

What life insurance to buy:
Many advisers recommend term insurance over permanent. Term insurance costs a fraction of permanent insurance like whole life (with a locked-in premium) or universal life (where the premium may vary based on projected interest rates). Term rates tend to be constant for the life of the policy — 5 to 30 years — but coverage is only 'rented', not owned. Term insurance expires when the policy does. When their term insurance expires, people who are in ill health or are otherwise considered a bad risk may finds themselves uninsurable or facing prohibitively higher premiums.

One compromise is converting term insurance to a permanent policy at preset points, allowing coverage to continue but at higher rates. Permanent insurance should not expire and it sometimes is used as a savings tool because it accumulates cash value. If policies are surrendered within a short period of time, however, policyholders may receive little of their investment.

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