Life Insurance for the NexGen Investor: A Fiduciary’s Perspective

For many young professionals, life insurance can feel like something to worry about later, after the house, the kids, the investments. But life doesn’t always follow a predictable timeline. When used thoughtfully, life insurance isn’t about fear; it’s about responsibility. It’s about ensuring the people who rely on you—emotionally, financially, or logistically—are protected if the unthinkable happens.

As fee-only fiduciary advisors, we don’t sell life insurance, and we don’t earn commissions or bonuses for recommending a specific policy. Our role is to help you make decisions rooted in logic, aligned with your goals, and free from pressure. When appropriate, life insurance can be one of the most important decisions you make.

When Should You Get Life Insurance?

The most common misconception I hear is: “I don’t need life insurance until I have kids.” While that’s certainly a common trigger, it’s not the only one. You should consider life insurance if:

• You have a partner who relies on your income.
• You’ve co-signed on any major loans (e.g., a mortgage or private student debt).
• You own a business or have business partners.
• You want to leave behind enough to cover funeral costs and final expenses.

Even single adults can benefit from a small policy to avoid burdening their family with unexpected costs. Plus, there’s a financial incentive to starting young: premiums are typically lowest when you’re healthy and in your 20s or 30s and locking in a low rate now can save you thousands over time. ^1,2

What Type of Insurance Makes Sense?

There are two main types of life insurance: term and permanent.

Term life insurance is straightforward and affordable. You choose a coverage amount and a term length—usually 10, 20, or 30 years. If you pass away during that term, the policy pays out to your beneficiaries. If you outlive the term, the coverage ends, similar to car or renters’ insurance.

Term insurance is ideal for covering important but temporary needs, such as paying off a mortgage, replacing income while your children are young, or settling business liabilities.

Permanent life insurance includes products like whole life, universal life, and variable universal life. These policies offer lifelong coverage and often build cash value, which can be borrowed against or used later. However, these features come at a price. Premiums are significantly higher, and internal fees are often difficult to understand.

As fiduciary advisors, we rarely recommend permanent insurance unless there's a clear, specific need, such as funding a trust, planning for estate taxes, or supporting a child with special needs. Unfortunately, many people are sold expensive permanent policies when a simple term policy would have been more appropriate.

How Much Coverage Do You Need?

This is one of the most important and often misunderstood questions in the insurance world.

A quick estimate is the 10× rule: multiply your annual income by 10. This gives a helpful starting point but doesn’t factor in your unique responsibilities.

A more tailored method is the DIME formula:

• Debts: Student loans, car loans, personal loans
• Income: Multiply your income by the number of years you’d want to replace it
• Mortgage: Pay off your home or provide housing security
• Education: Account for future college costs for your children

For example, someone earning $100,000 annually, with a $400,000 mortgage, $30,000 in student debt, and two children to send to college might need a policy in the $1.2 to $1.5 million range. ³

The most thorough method is the capital needs or human life value approach. This calculates your future earning potential, adjusts for taxes and inflation, and subtracts assets you already own. While it provides the most precise estimate, a hybrid approach is often sufficient for many individuals.⁴

Why Fiduciary Advice Matters

Here’s the key difference: A fiduciary works for you. We don’t sell products, and we don’t receive bonuses or commissions for recommending insurance. That means we can evaluate your needs objectively and recommend what actually makes sense.

By contrast, many agents, especially those tied to large insurance companies, are compensated through commissions and may have sales quotas. Even if unintentional, that creates a conflict of interest.

With a fiduciary, your life insurance becomes part of a broader financial plan. We assess your liabilities, assets, dependents, career trajectory, and estate planning goals, then help you integrate insurance into that big picture.⁵

Final Thoughts

Life insurance isn’t glamorous, but it’s essential. It’s the financial foundation that allows your loved ones to grieve without the added weight of financial distress.

If you’re building a life that others depend on, make sure it’s protected. Buy coverage early. Choose the right kind. Calculate your needs thoughtfully. And most importantly, work with someone whose only one incentive is to act in your best interest.

Sources

1. Investopedia – Family Life Insurance Coverage
2. John Hancock – How Much Life Insurance Do You Need?
3. Kiplinger – How Much Life Insurance Do You Need?
4. Ritter Insurance Marketing – 4 Ways to Calculate Life Insurance Needs
5. Investopedia – Fee-Only Financial Advisors

Disclosures:

Apella Capital, LLC (“Apella”), DBA Apella Wealth is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered or excluded or exempt from registration requirements. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. A copy of Apella’s current written disclosure brochure filed with the SEC which discusses among other things, Apella’s business practices, services and fees, is available through the SEC's website at: www.adviserinfo.sec.gov. No current or prospective client should assume any discussion or information contained in this material serves as the receipt of, or as a substitute for, personalized investment advice.

Apella Wealth does not sell commission-based insurance products.  The firm does work with clients through the financial planning process to identify potential gaps in insurance coverage and may facilitate placement of insurance at client direction.