Finder may earn compensation from partners, but editorial opinions are our own. Advertiser Disclosure

How much life insurance do I need?

Figure out how much life insurance to buy based on your budget and current income.

This article was reviewed by Andrew Flueckiger, a member of the Finder Editorial Review Board and certified insurance counselor and licensed insurance agent in five states.

While there are common coverage amounts — like $250,000, $500,000 and $1 million — the amount of coverage you need boils down to your financial obligations and how much you’re willing to pay in premiums. Ideally, your payout will cover living expenses and outstanding debt for your loved ones, but it’s important to choose a policy you can comfortably afford now.

Find out how to do the math based on your budget and income.

How much life insurance do I need?

Your life insurance coverage should be enough for loved ones to pay for current everyday expenses, plus any future needs like college, medical bills and funeral costs.

The best way to figure out the exact coverage amount is to think through all your expected expenses, then subtract any savings or other income your loved ones will have. Some experts recommend this rule of thumb: Get coverage equal to 10 times your annual income. So if you make $50,000, you’d buy $500,000 in life insurance as income replacement for 10 years.

But this general rule doesn’t factor in debts, future raises or inflation. It also may leave out important financial needs that aren’t considered when multiplying by a flat number, says the Insurance Information Institute.

How do I calculate how much life insurance I need?

Select Start to enter your details and calculate how much coverage you need in less than three minutes.

Sample life insurance calculation

Follow these 7 steps to figure out how much life insurance to buy, or by using a life insurance calculator.

  1. Start with your current income plus future raises.
  2. Calculate how many years you’ll need that income.
  3. Factor in ongoing bills, such as mortgage payments.
  4. Increase any future costs, such as health costs.
  5. Add future savings, such as kids’ college funds.
  6. Consider adding a little extra for funeral planning.
  7. Subtract any other savings you have.

An example of your rough numbers to decide how much coverage to buy:

  • $30,000 annual take home pay plus 3% raises
  • x 20 years until retirement = $800,000
  • +$100,000 left on mortgage payments
  • +$150,000 healthcare costs when retired
  • +$20,000 for kids’ college tuition
  • +$10,000 for funeral costs
  • -$80,000 in savings and 401k
  • =$1,000,000 in coverage

How much life insurance can I afford?

To figure out how much life insurance you can afford, look at your monthly income versus your monthly expenses.

It’s important to choose a policy with premiums that stay within your leftover income. That way you can keep up with the payments — and keep your coverage. For example, the average cost of a $250,000 term life policy for a nonsmoking 30-year-old is $160 a year or $13 a month, according to Finder’s analysis of rates across 14 life insurance companies.

7 factors that affect how much life insurance you need

When you’re figuring out how much life insurance coverage to buy, these factors may weigh into your decision:

1. Your dependents

If you have loved ones who rely on your income, consider the expenses you pay for now and anticipate any future costs.

  • Spouse or partner. Consider your partner’s age, health and lifestyle, plus how many years both of you have until retirement. If your partner brings an income, you may not need as much coverage.
  • Children. Consider boosting your coverage if you have kids or are planning to have kids.
  • Other dependents. Consider whether aging parents or other relatives could get by without you or your income.
  • Pets. You can set up a beneficiary and caretaker for your pet and leave some of your death benefit to cover pet care.

2. Existing debt

Not all debts die with you — some get paid off by your estate or transferred to your parents or partner, according to the Consumer Financial Protection Bureau. Factor individually owned and co-signed loans into your insurance coverage, like a mortgage or credit card debt.

3. Current expenses

Consider your family’s daily living expenses, covering bills like your mortgage, utilities, groceries, car and home insurance.

4. Future expenses

  • Education plans. Factor in future college or private school costs, like tuition, boarding and books. The average cost of a four-year college is $27,357 a year, according to the National Center for Education Statistics.
  • Long-term care. Think through any medical or nursing home expenses you’re covering for parents or aging family members and include them in your life insurance policy. The cost of long-term care often falls in the $4,000 to $8,000 range per month, according to the US Department of Health & Human Services.
  • End-of-life expenses. To ease your family’s stress after you die, you can add enough coverage to pay funeral costs. Funerals can cost over $7,000, according to the National Funeral Directors Association.

5. Business ownership

A life insurance policy can give your company and its executives and employees financial security if you die prematurely.

6. Leaving a legacy

You can buy higher coverage than your loved ones need for expenses to give them a financial safety net when you’re gone. Then, they can maintain or enhance their lifestyle, or even set up a charity in your name.

7. Other financial plans

When you’re calculating the coverage you need, subtract any existing savings in your savings accounts, 401k, 529 plan or other savings and investments.

    Compare life insurance companies

    Compare policies and prices from major insurers side-by-side to find the best possible deal.

    Name Product Issue age Minimum Coverage Maximum Coverage Term Lengths Medical Exam Required
    Sproutt
    18 - 60 years old
    $50,000
    $4,000,000
    5, 10, 15, 20, 25 and 30 years
    No
    Compare 40+ insurers and apply online to get the lowest possible price — no medical exam required.
    Policygenius - Life Insurance
    18 - 85 years old
    $50,000
    $10,000,000
    10, 15, 20, 25, 30 years
    Depends on provider and policy
    Compare 12+ top insurers side-by-side to get the best possible deal, and shop return of premium policies online.
    Bestow
    18 - 60 years old
    $50,000
    $1,500,000
    10, 15, 20, 25, 30 years
    No
    Get a quote in less than 10 minutes with on-the-spot approval and no medical exam.
    Everyday Life
    20 - 75 years old
    $100,000
    $10,000,000
    10, 15, 20, 25, 30, 35 and 40 years.
    No
    Ladder multiple life insurance policies to save on the coverage you need for all your debts.
    Ladder
    20 - 60 years old
    $100,000
    $8,000,000
    10, 15, 20, 25 or 30 years
    No, for coverage up to $3M
    Apply for term life insurance online without the medical exam. Get an instant decision and adjust your coverage at no charge.
    loading

    Compare up to 4 providers

    Ask an expert: How to lower life insurance rates

    Jake Tamarkin

    Jake Tamarkin
    CEO & Cofounder of Everyday Life Insurance

    Expert financial planners know that people’s needs will decline over time as their savings build, kids grow up and retirement nears. You can save 50% or more just by doing a good job of truly assessing your needs and how they will evolve over time and building a coverage plan that matches that.

    So, before you buy that gigantic 30-year policy, consider if it makes sense to perhaps get a couple of smaller policies that phase out over time. A good insurance agent should be able to help you price out different coverage options like that, and at the end of the day, that could be more consequential than which insurance company you choose to work with, or what bells and whistles they tack on to their products.

    What if I can’t afford the coverage level I need?

    If you come up with a coverage amount that you can’t afford, consider these options to lower the cost of your life insurance premiums:

    • Ladder policies. Stacking policies could lower your rate. You may buy a $300,000, 30-year term policy to fit your mortgage, plus a $200,000, 20-year term policy to cover your kids’ education.
    • Buy what you can afford now. You can get another term policy later that satisfies larger coverage needs. But your quotes rise as you age.
    • Start healthy habits. Improving your health can score a much lower rate. If you’re improving your health, you might wait to buy until you score higher on the medical exam.
    • Skip add-ons. You could delete any policy riders to lower your monthly premium.
    • Avoid policies with under 10-year terms or $50,000 in coverage, which cost more for the coverage. Opt for the lowest standard coverage offered, like a $100,000, 10-year term.

    Who doesn’t need life insurance?

    If these scenarios apply to you, you may not need life insurance right now:

    • You don’t have anyone relying on your income. The primary purpose of life insurance is to replace your income when you die. If you don’t have anyone relying on your paycheck, like a spouse, child or pets, you may be able to hold off on buying a policy. But if you think your situation may change in the future, it could be worth locking in a low premium while you’re young and healthy.
    • You don’t have any debt or major assets. Many people buy policies to cover their outstanding debts and protect their assets — such as a house — when they die. If you haven’t accumulated any assets or debt yet, you may not need life insurance.
    • You’ve built up enough money from savings and investments. If you have sufficient savings, healthy retirement accounts and solid investments, you may be able to self-insure. This means your loved ones would be able to cover their living expenses and financial needs using the accounts and liquid assets you already have.
    • You have group life insurance with plenty of coverage. Group insurance policies are offered by employers, and they’re typically limited to small amounts like $100,000. If you do the math and discover your financial obligations come to less than that, you may have sufficient life insurance through your workplace.

      Bottom line

      Personalize your coverage level based on your financial obligations and the premiums you can afford. Then, compare life insurance companies to find the best possible policy for your budget.

      Common questions about life insurance coverage

      More guides on Finder

      Ask an Expert

      You are about to post a question on finder.com:

      • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
      • finder.com is a financial comparison and information service, not a bank or product provider
      • We cannot provide you with personal advice or recommendations
      • Your answer might already be waiting – check previous questions below to see if yours has already been asked

      Finder.com provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

      By submitting your comment or question, you agree to our Privacy and Cookies Policy and finder.com Terms of Use.

      Questions and responses on finder.com are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.
      Go to site