Life insurance creates a death benefit that can provide money to beneficiaries after the insured parent dies while the policy is in force.

For parents, the central question is what financial obligations would remain if one parent were no longer there.

NAIC recommends considering both the amount of family income a person provides and the value of services that person contributes when evaluating life insurance needs.

For a working parent, income replacement is often the largest component of the life insurance calculation.

Instead of using a universal salary multiple, consider what portion of the parent’s income actually supports the family and how many years that support may be needed.

Ask questions such as:

• How much household spending depends on this income?
• How old are the children?
• How many years until the children may become financially independent?
• Could the surviving parent continue working at the same level?
• Would child-care costs increase?
• Would the family want to remain in the same home?
• How much savings is already available?

A parent does not need to earn a paycheck for the family to experience a substantial financial loss after that parent’s death.

NAIC specifically advises families to consider coverage for both spouses, including a parent who is not employed outside the home.

Services that might need to be replaced can include:

A surviving working parent might also need to reduce work hours, take a different job, or purchase additional services, creating an indirect financial loss beyond the cost of outside child care.

Child-care costs can change dramatically if one parent dies.

Possible costs include:

• Day care.
• Preschool.
• Babysitting.
• Summer programs.
• After-school care.
• Transportation.
• Specialized care for children with disabilities or medical needs.

Families with younger children may need these expenses funded for many years, while parents of older teenagers may have a much shorter child-care period.

Parents often want enough financial protection to allow surviving family members to remain in the same home.

That does not necessarily mean the death benefit must pay off the entire mortgage immediately. Consider:

• Remaining mortgage balance.
• Monthly payment.
• Property taxes.
• Homeowners insurance.
• Maintenance.
• Whether the surviving parent could comfortably maintain the home.
• Whether downsizing would be acceptable.

NAIC identifies a mortgage as one example of a financial obligation for which term life insurance can be useful because the need exists for a defined period.

Parents who intend to help with college, vocational training, or other education can include that goal in their life insurance calculation.

The amount does not necessarily need to equal the projected full cost of education. Existing education savings, scholarships, expected family contributions, and other resources can reduce the amount the death benefit would need to provide.

Life insurance planning can also account for obligations that could affect the surviving household.

The legal responsibility for debts after death depends on ownership, estate law, state law, and the specific obligation, so parents should avoid simply adding every individual debt to a coverage calculation without considering whether it would actually affect survivors.

There is no universal amount that every parent needs.

A more useful approach is to estimate future financial needs and subtract resources that would already be available.

Potential financial needs can include:

• Income replacement.
• Housing.
• Child care.
• Education.
• Household services.
• Debts.
• Final expenses.
• Emergency reserves.
• Special-needs support.

Existing resources can include:

• Savings.
• Investments.
• Existing life insurance.
• Employer life insurance.
• Education savings.
• Other assets intended for survivor support.
• Applicable survivor benefits.

Term life insurance provides coverage for a specified period.

If the insured dies while qualifying term coverage is in force, the policy pays the death benefit to the beneficiary. If the term ends while the insured is alive, the coverage generally ends unless it is renewed, converted, or otherwise continued according to the policy.

Term insurance can be useful for needs that have an identifiable endpoint, such as:

NAIC states that term coverage generally has lower premiums in the early years than permanent life insurance and does not ordinarily build cash value.

Permanent life insurance is designed to provide coverage for a longer period and can remain in force for life if policy requirements are satisfied.

Types can include:

• Whole life.
• Universal life.
• Variable life.
• Other permanent products.

Permanent policies can accumulate cash value, although guarantees, investment risk, premium flexibility, policy charges, and cash-value behavior vary by product.

Because permanent coverage is generally more expensive than term coverage, parents should understand why they want lifelong protection before committing to the additional cost.

The policy term should generally align with the period during which a parent’s death would create a major financial gap.

Consider how long it will be until:

• The youngest child becomes financially independent.
• The mortgage is largely or completely repaid.
• Education funding is complete.
• Retirement savings become sufficient to support the surviving spouse.
• Other major financial obligations decline.

Employer life insurance can be an inexpensive and useful part of a family’s protection, but parents should not assume it is sufficient by itself.

Texas insurance regulators note that basic group life coverage is often limited, and employer-based coverage typically ends when employment ends unless continuation, portability, or conversion rights are available.

Ask your benefits department:

An individually owned policy can provide coverage that is not dependent on remaining with a particular employer.

The beneficiary designation determines who receives the life insurance death benefit, subject to applicable law and policy terms.

Parents should generally consider naming:

• Primary beneficiaries who receive proceeds if eligible when the insured dies.
• Contingent beneficiaries who can receive proceeds if the primary beneficiary cannot.

NAIC recommends checking beneficiary information annually and after major life events such as the birth of a child, divorce, or other significant family changes.

Parents often want their children to benefit from life insurance, but directly naming a minor can create administrative and legal complications.

State insurance guidance warns that insurers generally cannot simply pay substantial life insurance proceeds directly to a minor as though the child were an adult.

Depending on your family’s circumstances and state law, options worth discussing with an estate-planning professional can include:

Beneficiary planning can affect how and when children ultimately receive money, so parents with minor children should consider coordinating life insurance with their broader estate plan.

A child who is expected to remain financially dependent well into adulthood can create a much longer insurance need than the typical child-rearing period.

Planning can involve:

• Long-term caregiving costs.
• Housing.
• Medical and support services.
• Transportation.
• Education or vocational support.
• Trust planning.
• Potential interaction with means-tested government benefits.

Because beneficiary designations and inherited assets can affect some benefit programs, families facing this situation should consider specialized legal and financial planning rather than naming beneficiaries without reviewing the consequences.

Life insurance can be particularly important for a single parent because one person’s income and caregiving may support most or all of the household.

Single parents should consider:

Not necessarily.

One parent’s death might primarily create an income-replacement need while the other’s might primarily create child-care and household-service expenses.

Calculate each parent’s economic contribution independently rather than assuming both need either identical coverage or that only the higher earner needs insurance.

A rider is an optional provision that changes or adds benefits to a policy.

Examples can include:

Riders can add cost and contain detailed eligibility rules, so evaluate whether each benefit solves a meaningful risk rather than adding every available option automatically.

Premiums can vary based on underwriting and policy characteristics such as:

• Age.
• Health history.
• Current health.
• Tobacco use.
• Coverage amount.
• Policy type.
• Term length.
• Occupation and activities where relevant.
• Other underwriting factors permitted by applicable law.

Because health can affect both eligibility and price, replacing coverage later can be more expensive or difficult if health has changed.

If you are replacing one life insurance policy with another, avoid creating an unintended gap.

Health changes can affect the availability or price of new coverage. A new application, approval, policy delivery, payment requirement, or other condition may need to be completed before the new policy is fully effective.

Confirm that replacement coverage is actually in force before canceling an existing policy when uninterrupted coverage is important.

Under current federal tax guidance, life insurance proceeds received by a beneficiary because of the insured person’s death are generally not included in the beneficiary’s gross income.

However, exceptions can apply. For example, interest earned on proceeds can be taxable, and special rules can apply when a policy has been transferred for valuable consideration.

Estate-tax, ownership, trust, business, and large-estate issues can be more complicated, so families with substantial assets or unusual ownership arrangements should obtain individualized tax and estate-planning advice.

NAIC recommends reviewing beneficiary information annually and reviewing coverage when major life circumstances change.

Review your policy after events such as:

Coverage needs can decrease as children become independent, debt declines, and assets grow. A policy that was appropriate for new parents may be unnecessarily large or too small many years later.

Insuring Only the Highest Earner

A lower-earning or stay-at-home parent’s death can create major child-care and household-service expenses.

Using Only a Salary Multiple

A simple multiple does not account for children’s ages, child care, mortgage size, education plans, savings, or the economic value of unpaid caregiving.

Relying Entirely on Employer Coverage

Group coverage can be limited and may end when employment ends.

Naming a Minor Without a Plan

Directly naming a young child can create delays or require a legally authorized adult or other arrangement to manage proceeds.

Forgetting Contingent Beneficiaries

A contingent beneficiary provides another destination for the death benefit if a primary beneficiary cannot receive it.

Failing to Update Beneficiaries

Birth, divorce, remarriage, and other family changes can make old beneficiary designations inconsistent with current intentions.

Buying More Permanent Insurance Than the Budget Can Support

A policy only protects the family if it remains in force. Affordability over the long term matters.

Canceling an Existing Policy Before a Replacement Is Active

A new application does not necessarily mean new coverage is already in force.

Never Reviewing the Policy

Insurance purchased when a child is born may need substantial changes as income, debt, assets, and family responsibilities change.

Life insurance for parents should be based on the financial consequences a family would face if either parent died. Income replacement is important, but it is only part of the calculation. Housing, child care, education, debts, final expenses, and unpaid household services can also create substantial needs.

Evaluate both parents, including a stay-at-home parent. Then subtract savings, existing insurance, investments, and other available survivor resources from the family’s projected needs to estimate how much additional insurance may be appropriate.

Term insurance can provide relatively lower-cost protection during the years when children, mortgages, and other temporary obligations create the greatest need. Permanent insurance can provide longer-duration protection and may build cash value, but usually requires a larger premium commitment.

Beneficiary planning is equally important. Name primary and contingent beneficiaries, review them regularly, and use appropriate legal planning when minor children or dependents with long-term special needs are involved.

Finally, revisit coverage as your family changes. A new child, mortgage, job, divorce, remarriage, increase in savings, or children becoming independent can substantially change both how much insurance you need and how long you need it.

• National Association of Insurance Commissioners, Life Insurance, last updated November 14, 2025.
• National Association of Insurance Commissioners, Consumer Life Insurance Guidance, accessed August 2026.
• National Association of Insurance Commissioners, Baby on Board Changes Insurance Needs, accessed August 2026.
• National Association of Insurance Commissioners, What Type of Life Insurance Is Right for You?, accessed August 2026.
• National Association of Insurance Commissioners, Want to Purchase Life Insurance? Here Are Tips to Help You Through the Process, accessed August 2026.
• National Association of Insurance Commissioners, What to Know About Life Insurance Beneficiaries, September 12, 2023.
• Texas Department of Insurance, Life Insurance Guide, accessed August 2026.
• Texas Department of Insurance, Welcoming a Child to the Family? Don’t Forget the Insurance, last updated December 12, 2025.
• South Carolina Department of Insurance, Know the Truth About Life Insurance, accessed August 2026.
• Internal Revenue Service, Life Insurance & Disability Insurance Proceeds, accessed August 2026.
• Internal Revenue Service, Publication 525, Taxable and Nontaxable Income, 2025.