What that says is that you'll want a lump sum of money earning about 7 percent each year to pay those annual expenses. The total should approximate the amount of life insurance you need. Now that we have an idea of how much to buy, there's the question of what kind to buy. Here's where it gets tricky. It used to be that you bought a specific amount of insurance for a set period of time by paying a known premium.
Term insurance is simple.
It's also the lowest cost insurance when you're young. But it does have some drawbacks. The first problem is that it will cost more to buy the same insurance as you get older. The second drawback is that there's no guarantee that you can buy insurance next year. Suppose you have a heart attack.