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Junior is moving back, so how much life insurance will you need?

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Two weeks ago, I did a segment (some might call it an intervention) on the Today show about grown kids failing to launch, as a trend I wrote about for Fortune.com. A mom had written to the show about how her 27-year-old (fully-employed) daughter was still home and showing very little desire to leave. I gave her a shove.

After the show, I got an email from my stepfather, Bob Cohan, a retired insurance broker about how this trend affects our need for life insurance:

“I used to hear, “Well, by 55, the kids will be out of the house and I’ll have savings and won’t need life insurance.” It wasn’t true then and certainly isn’t true now.

In the later years of my career, I often had phone calls from clients in their 60’s, who thought that they had outlived the need for more life insurance.

The conversation would go something like this:

CLIENT: Bob, I want you to get me $ 200,000 or $ 300,000 of term insurance.”

BOB: How come? I thought we agreed that you were in good shape and only needed to keep what you have.

CLIENT: Yeah, that was true until now. My daughter has left her husband; I have her and her kids in an apartment and I’m fronting their living expenses until she gets some kind of settlement. I don’t want what she needs to come from my wife’s share of my estate if I die before she gets straightened out.

He has a point. Life has changed over the last few decades. We’re staying single longer. Having kids later or as single parents (and more of them with special needs). Becoming empty nesters much later. Taking care of older parents. The list goes on.

Jeff Waddle, a New York-based State Farm agent, says he finds life insurance needs change some seven to nine times in a person’s lifetime. So how do you make sure your purchases keep pace?

Remember, you’ll likely be working longer. The best (in fact, the only) way for most people to afford as much coverage as they need is to buy a term policy. “I think it would be a mistake, even with people living longer, for young people to buy a whole life policy that would carry a smaller death benefit than they’d need,” says Steven Weisbart, chief economist for the Insurance Information Institute.

What’s not a mistake is to realize early on that you’ll likely need that coverage longer. Some 35% to 40% of 65 to 69-year-olds are now in the labor force, he notes. And predictions are that will increase even more. That argues for looking for a 20-year or 30-year level term policy rather than a 10, for instance, as well as making sure that any policy has an option to convert to whole life in case you can no longer qualify for insurance at an older age. (FYI, the out-of-pocket cost of that conversion is not nearly as great as most people imagine.

Take a look at this scenario from New York Life: a 32-year-old male buys a $250,000 20-year level term policy. His premium is $208 a year. At age 50, he decides he needs to continue the coverage so he re-ups for another 10. His premiums (assuming no change in health) jump to $438. At age 60, his total cost for carrying the insurance over the years would $8124. If at age 50 he decided to convert to whole life instead, his premium would jump significantly to $6,208. At that point, he starts earning cash value in addition to carrying his death benefit. Ten years down the road, he’s spent $65,824 on premiums, but earned $56,504 in cash value – in other words, he’s spent $9,320. And he can continue the coverage if he still needs it. As for the argument that he should just buy the term and invest the difference – that only works if you actually do it.

Also, consider debts you’ll carry later in life. When you run an initial calculation to figure out how much life insurance you need, it’s common to not just buy enough to replace your salary but to cover big expenses like college tuition and paying off the mortgage. Student loans are now ever present in middle age. And mortgage debt is lingering longer than ever. According to the Consumer Financial Protection Bureau, 30% of homeowners who are 65 and up were carrying mortgage debt in 2011, up from 22% a decade earlier. The amount they were carrying rose significantly, too – from $43,000 in 2001 to $79,000 in 2011. Parent plus loans should be considered as well. The key is not to wait until your level term policy nears its expiration date in order to replace it to meet these needs. You could have a health incident in the meantime that would impact your ability to continue your coverage. Waddle recommends an insurance review to his clients once a year.

You should also take another look at your priorities. According to recent research from LIMRA, three in 10 adults in American have no life insurance. And 50% say they don’t have enough – which isn’t surprising when you know that the average amount of coverage is $167,000, down by $30,000 from 2004. Of particular concern to Weisbart, single parents (single moms make up one-quarter of U.S. households, single dads 6%) who face significant financial pressures, but have a greater financial need for life insurance than couples because there’s no other (potential) wage-earner in the picture.

The fact is, life insurance – term, in particular – is 20% cheaper now than it was in 2000, says Chris Blunt, co-president of the Insurance and Agency Group at New York Life. He argues that even younger people can afford it – they’re just not putting it high enough on the list. I think the reality is that younger people can afford it. “For the cost of a daily Starbucks latte you can buy about $100,000 of term,” he says. “For [the same amount] of permanent, we’re talking the cost of your iPhone bill. The idea that they can’t afford it is more myth than reality.”

It’s wise to talk to an agent. According to LIMRA, two in 10 consumers are now willing to consider buying their life insurance from big box stores like Costco (COST). Nearly as many prefer to make their purchases online. And almost half of people are already buying their policies through work. What you miss out here is a person asking you the questions necessary to figure out how much coverage you actually need. Granted, it may be cheaper to DIY it, but there’s a greater risk of not buying enough. Notes Blunt: “People estimate a significant need for life insurance, but the average American that has it only has enough to cover their family for about three years. What happens when those three years are up?”

Steven Goldstein contributed to this report.