Common Coverage Mistakes

Most coverage problems come from a few predictable shortcuts. Each is shown below with numbers.

Last updated: October 12, 2026. The NAIC life insurance page was read on that date. Worked amounts were computed with this site's coverage estimate and term-versus-whole-life code. The family is hypothetical.

The example family

To keep the examples consistent, take a hypothetical household: income of $75,000, a $280,000 mortgage, $15,000 of other debt, two children with $100,000 of education costs each, $15,000 for final expenses, 10 years of income to replace, $100,000 of existing life insurance and $40,000 of savings. The coverage estimator's DIME method adds up the needs: $750,000 of income, $15,000 of debt, $280,000 of mortgage, $200,000 of education and $15,000 of final expenses make $1,260,000. Subtracting $140,000 of existing coverage and savings leaves $1,120,000, which rounds up to $1,125,000 for quoting.

Mistake 1: using only a multiple of income

A common shortcut is 10 to 15 times income. For this family that is $750,000 to $1,125,000. The low end is $370,000 below the estimate of $1,120,000. Multiples ignore your actual mortgage, debts and children. They are a sanity check at best; use them to test the answer from a real list of needs.

Mistake 2: ignoring what you already have

The opposite error is to forget existing assets and coverage. Without crediting $100,000 of existing insurance and $40,000 of savings, the example looks like it needs $1,260,000, which is $140,000 more than necessary and more premium than you need. Gather your group coverage, any older policies and liquid savings before you request a quote. Remember that employer coverage often ends when the job does, so count it only if it will still exist when it is needed.

Mistake 3: a term that ends too soon

If a 15-year policy ends while a child is still a student and the mortgage has years to run, the family is unprotected at a time when the policyholder is older and coverage costs more. The NAIC notes term insurance pays only if death occurs during the term. Use the term length guide to match the term to the longest obligation.

Mistake 4: buying cash value you do not need

Permanent policies, such as whole life, last for life and build cash value, and the NAIC describes term as generally more affordable early on. The gap can be large. With a $30 monthly term premium and a $200 whole life premium, the difference is $170 a month. Over 20 years the term premiums total $7,200 and the whole life premiums total $48,000. If that $170 a month were invested at an assumed 7% instead, it would be worth about $88,558 after 20 years. That return is an assumption and is not guaranteed, and some people value the lifelong coverage and the borrowing feature. The comparison calculator lets you enter real quotes and your own return.

Mistake 5: forgetting a non-earning spouse or caregiver

A parent who provides childcare and household work has an economic value even without a salary; the cost of replacing those hours can be large. Include it in the estimate, as extra income-replacement years or as additional debt-like needs.

Mistake 6: never reviewing

A policy bought for a 30-year-old with one child may be wrong at 40 with three. Review after a birth, a home purchase, a divorce, a career change or a large rise in savings. Do not drop a policy until a replacement is approved and in force, and do not misstate your health on a replacement application. The underwriting guide explains how age and health feed into the new price.

A short checklist

• List needs: income years, debts, mortgage, education, final costs.
• Subtract existing insurance and liquid savings.
• Round up to a quotable amount.
• Pick a term from the longest obligation.
• Compare quotes and re-run after life changes.

Run your own numbers in the coverage estimator. These guides are for education and are not financial, tax, legal or insurance advice. Nothing you type into the calculators is sent anywhere.