Popular among seniors and those new to the workforce, this policy can take care of your family when you’re gone.
No one can predict the future, but life insurance can help you protect your family. Ideally, your policy should allow your beneficiaries to maintain the lifestyle they’ve grown accustomed to.
The best time to purchase life insurance is as soon as you need it. If that’s now, you might be wondering how much coverage you should buy.
To answer this question, consider your income, assets and your financial obligations now and in the future. A $250,000 policy is generally inexpensive and popular among seniors and young earners, as well as careful savers who have healthy savings, retirement and 401(k) accounts.
Companies that offer $250,000 coverage
How much does a $250,000 life insurance policy cost?
As one of the most popular policies on the market, there’s stiff competition between providers to get your business. This drives down rates, making a $250,000 policy pretty affordable, and even more so if you’re young, healthy and a non-smoker.
Life insurance is customized to the individual, so the rate you’re offered reflects your gender, age, health, lifestyle, job and hobbies, plus the length of your policy.
We look at average costs for a 20-year term policy with $250,000 of coverage.
Let’s use a 25-year-old nonsmoking man in perfect health as an example. According to our research, Pacific Life might charge him $13.30 a month. And if he smokes, he could find coverage with Banner Life or William Penn for around $36.25 a month.
For a nonsmoking 25-year-old woman, she may find a policy with Banner Life or William Penn for around $11.52 a month. Meanwhile, a smoker might pay $30.31 a month with those same providers.
To lock down the best possible rate, apply for a life insurance policy as soon as you need it. The younger and healthier you are, the cheaper your premium will likely be.
Is a $250,000 life insurance policy right for me?
The amount of coverage you buy should account for three things: Your income, your assets and your financial obligations.
Your income
Most people purchase policies that replaces their income and covers their family’s cost of living for 5 to 10 years. To figure out how much coverage to carry, choose a target number — like 10 years — and work backwards from there. Use your salary as a starting point, and consider any other funds your family would have access to when you die, such as retirement accounts, savings and Social Security. If you think your dependents would need $250,000 to pay for their living expenses over 10 years, you may be in the market for a $250,000 policy.
Your assets
As you work your way up the career ladder, you’ll most likely acquire assets and wealth, like a house, car, savings account or 401(k). If your estate is worth $250,000, a life insurance policy can protect it and provide liquid cash to pay estate taxes. And if you’re a careful saver with healthy bank accounts and lucrative investments, you may need a smaller policy.
Your financial obligations
Assess everything you pay for now and expect to pay for in the future. Your responsibilities might include:
- Debt. Your debt doesn’t die with you, so you’ll want to leave enough money to cover your mortgage, student loans, car loan and credit card debt.
- Children. The general rule is to cover your kids until they’re working and earning money themselves. So if they’re young, aim for a larger policy.
- Spouse. If your partner is a stay-at-home parent or works part time, add more coverage. If they’re the breadwinner or much younger than you, you may be able to reduce it.
- College costs. Increase the coverage amount for each child who plans to go to college.
- Business expenses. The value of your business determines your need for life insurance.
- End-of-life expenses. To avoid saddling your family with the financial burden of paying for your funeral, most policyholders set some funds aside.
Do your financial obligations add up to $250,000? You’re in the market for a quarter of a million dollars of coverage.
When you’re crunching the numbers, be wary about buying too much life insurance. Your policy should mirror your financial situation, so only buy a $250,000 policy if you really need it.
Can I get a $250,000 life insurance policy?
To qualify for a $250,000 policy, you’ll need to meet requirements set by your insurance company.
Your insurer will take your age and health into account, and as always with life insurance, young, healthy applicants are the best candidates. Insurance companies aren’t huge risk takers — they calculate your risk of dying during the term based on your age, health and family history, and assess your eligibility from there.
Next, your provider looks at your income. It needs to know you can afford to pay the annual or monthly premiums on your policy. The good news is that the financial requirements for $250,000 of coverage aren’t too high.
Typically, insurers will approve applicants earning these salaries:
- Age 18–40: $10,000 per year or more
- Age 41–50: $16,666 per year or more
- Age 51–55: $50,000 per year or more
- Age 56–65: $25,000 per year or more
- Age 66–70: $50,000 per year or more
So, depending on your age, you’ll need to prove that $250,000 is between 5 and 25 times your annual income.
Can I get $250,000 coverage without a medical exam?
Yes, most likely.
Without a medical exam, insurers can’t get a complete understanding of your health and medical history. To cover their own risk, they charge higher premiums for no-exam policies. There are two types of policies on offer: Simplified issue and guaranteed issue.
Most insurers cap their coverage at $250,000. Unless you have a serious health issue or a family history of heart disease, diabetes or cancer, you should be eligible for coverage.
With no-exam policies, underwriters tend to check your DMV, pharmacy and Medical Information Bureau (MIB) records. Typically, the process takes up to a week, but depending on the provider, those in good health may be approved within minutes or days.
While traditional policies offer better value for your money, no-exam options are ideal for people who need coverage fast — say, to secure a business loan or fulfill a court order.
Bottom line
The concept behind life insurance is simple: Pay now to protect your family later. When you’re working out how much coverage to buy, carefully think about your assets and financial responsibilities. If they add up to $250,000, it’s worth looking into this kind of coverage.
Your eligibility for a $250,000 policy is also hinged on your income. Depending on your age, you’ll need to be earning $10,000 to $50,000 a year to qualify.
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