What to Know:

• If someone depends on you financially, life insurance can help replace lost income, pay debts, and cover future expenses.
• For most people, term life insurance is the most affordable option.
• Employer-provided life insurance can be convenient, but make sure the coverage is portable.

We spend most of our working lives building a financial life around one basic assumption: the money will keep coming in.

We buy a house, finance a car, raise a family, save for college, and plan for retirement – all based, at least partly, on the income we expect to earn tomorrow, next month, and years from now.

But what happens to all of those plans if the income suddenly stops? The expenses, after all, don’t necessarily stop with it.

The mortgage or rent still needs to be paid. Groceries still need to be bought. Credit card balances, car loans, and other debts don’t necessarily disappear. And for families with children, expenses such as child care and college can stretch years into the future.

When someone a household depends on passes away, the loss can create a financial hole for the people who depended on that income. That’s where life insurance comes in.

Despite the name, life insurance isn’t really about putting a dollar value on someone’s life. It’s about replacing some of the financial support that person would have provided if they were still here. And that support doesn’t necessarily have to come from a paycheck. A stay-at-home parent, for example, may provide child care and other household work that could be expensive to replace.

So figuring out whether you need life insurance – and how much – starts with a relatively simple but uncomfortable question: “If you died tomorrow, would anyone else suffer financially?”

CBS News Business Analyst Jill Schlesinger says for many people, the answer is yes. But that doesn’t necessarily mean you need an expensive policy or coverage for the rest of your life. Here’s our full transcript of an interview we did with her this week.

WKMG-TV: According to a recent study, nearly half of Americans said they would have trouble paying living expenses within six months of their primary wage earner’s death. This leads naturally into a conversation about life insurance. And to help guide us through this topic, CBS News Business Analyst Jill Schlesinger.

Jill, how do you know whether or not you need life insurance?

Jill Schlesinger: Question, if you were to die right now, would anyone suffer financially? I think for most folks, when they ask that question, they might find that the answer is yes. Insurance can cover lots of different things. There’s ongoing living expenses for your survivors. That might include child or elder care, paying off debt, funding of future expenses like college and maybe future retirement needs for your surviving spouse.

WKMG-TV: Jill, there are many different types of life insurance; which is best?

Jill Schlesinger: I think that for most people, it’s term life that’s the most affordable option. You’ve got a stated term of a policy during which, if the insured person dies, the insurance company pays the face amount to whoever’s named as the beneficiary. Costs are pretty reasonable for those who are in good health, up to about age 50. After 50, though, it gets a lot more expensive. The thought is that once you’re 50, maybe the kids are grown and you’ve saved your own money, you may not need that coverage anymore.

Then there’s permanent insurance. It’s often called whole or variable or universal life. These policies have savings or investment components. And they do tend to be more expensive because the death benefit stays in place for your entire life. And that’s why these kinds of policies, they’re used in smaller number of cases, maybe for estate planning or for the funding of a special needs trust for a child.

WKMG-TV: Finally, Jill, is it okay to buy life insurance through work or online instead of through a life insurance salesperson?

Jill Schlesinger: I think it’s fine to buy it through work. A lot of companies and organizations allow you to buy multiples of your salary. Just make sure that the policy is portable. That means you can take it with you if you leave the job. Otherwise, I do think it is helpful to check out those aggregation websites. They really are kind of cool because they allow you to compare apples-to-apples coverage from different companies.

Before you do start though, just make sure you calculate how much insurance you actually need. There’s a very easy-to-use tool at lifehappens.org.

WKMG-TV: Jill, thank you very much. You can see Jill regularly on CBS Mornings and the CBS Evening News. For more analysis, go to JillOnMoney.com.

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