Term life insurance buys peace of mind that your dependents will live on solid financial ground if you die prematurely and can no longer provide for them.

But many consumers get confused and make term life insurance mistakes that put their families at risk. Here are five myths about term life and what you should know:

1. I don't need life insurance because I'm a stay-at-home parent

Even if you don't earn an income, your death will pack a financial wallop because your family will have to pay for all those services you provide for free, such as child care. You should also consider your future earning potential in case you return to the workforce, as many stay-at-home parents do once their kids are in school.

2. I can use a formula to figure out how much life insurance to buy

Popular formulas, such as multiplying your income by a certain number, are too simplistic. A thorough needs assessment is in order. Evaluate short-term and long-term needs and your current financial resources. To determine the length of the term, review your debts, and the financial needs of your dependents and when those will change.

3. I can't qualify for life insurance because I had a serious illness

Don't automatically count yourself out for coverage. With treatment advances and better patient outcomes, life insurance companies have changed their underwriting guidelines for many diseases and conditions. For instance, today it's much easier to qualify for coverage at decent life insurance rates even if you've been treated for breast cancer, prostate cancer or depression.

4. I don't need to buy individual life insurance because I have coverage through work

Group life insurance at your job is a terrific benefit, but the coverage typically isn't enough for most people. Check the level of group coverage, evaluate your needs and buy additional insurance if necessary to protect your family.

5. Term life is always a smarter financial choice than permanent life insurance

Term life is far cheaper than permanent life insurance. Term life covers you for a certain period and has no cash value. It pays a death benefit to the beneficiary if you die within the term. Permanent life insurance covers you no matter when you die and includes a cash account you can borrow against.

The old adage to buy term life and invest the extra amount you would have spent on permanent life insurance isn't always the best course. Permanent coverage might be the better choice in a variety of circumstances, such as when you want to protect an estate or if you have a child with special needs.

Besides comparing life insurance quotes, talk to an agent you trust to design the best life insurance plan for your family.