ScrubMoney
Home · Library · Attending
Attending · Insurance and risk management

Life insurance when people depend on your income

2 min read

Buy life insurance when others depend on your paycheck — not before, and not as an investment. Term coverage, sized to the need, is the right default for most young physicians.

THE IDEA

Life insurance replaces your income for the people who depend on it — a spouse, children, or anyone tied to debt you co-signed. If no one depends on your income yet, you likely do not need it yet. When the need arrives, usually at the attending transition, term life insurance is the right default: pure protection for a fixed period (commonly 20 or 30 years) at a fraction of permanent policy cost. Permanent policies bundle insurance with an investment component at much higher premiums — understand exactly what you are buying before considering one.

10–12xincome: common starting estimate
20–30 yrstypical term lengths
DIMEDebt, Income, Mortgage, Education

Size coverage to the need, not a round number. Two starting methods: 10–12x annual income as a quick estimate, or DIME — outstanding debt, income replacement for the years dependents need it, mortgage balance, and future education costs — minus existing assets and coverage. Consider laddering terms (a larger 20-year policy plus a smaller 30-year one) so coverage steps down as obligations do, and favor convertible term so you can convert without a new medical exam if needs change. Revisit beneficiaries after marriage, births, divorce, and deaths — beneficiary designations override your will.

Insure the need, not the productAnyone pitching life insurance primarily as an investment is selling a product, not solving your need. Price the term coverage first; only then decide whether anything else belongs.

Your next steps

  1. List everyone who depends on your income and the debts tied to you.
  2. Estimate coverage with both the 10–12x method and DIME.
  3. Get term quotes from at least two carriers; compare convertible options.
  4. Name and review beneficiaries on every policy and retirement account.

Check your understanding

Select each question to reveal the answer.

✓ When others depend on their income — a spouse, children, or co-signed debt.
✓ Term is pure protection for a fixed period; permanent bundles insurance with an investment component at higher cost.
✓ Debt, Income, Mortgage, Education — a method for sizing coverage.
✓ Beneficiary designations pass outside the will and override it.

Planning questions

  1. Who depends on your income today, and for how many years?
  2. Using DIME or the 10–12x method, what coverage range does your need imply?

Sources