Life insurance isn’t one-size-fits-all and most people have no idea how much life insurance they need. Purchasing life insurance can often seem like a daunting process and you might be wondering where to even begin.
Life Insurance Calculator
Our life insurance calculator can help you determine what your family’s ongoing and one-time expenses are, and give you a head start on determining the right life insurance policy and coverage amount for you.
How-To Determine How Much Life Insurance You Need
Below, we break down the six steps that can help you estimate how much life insurance you might need.
Step 1: Do you need life insurance coverage?
While many people might think they might not need life insurance coverage, it’s actually an extremely smart investment for anyone to consider. If you fall into one of these categories, life insurance may be a good investment for you:
- You’re married
- You have children
- You have purchased a home
- You have a mortgage
- You own a business
- You have outstanding debts
Life insurance is a sure way to safeguard your loved ones in the case the unexpected happens.
Step 2: Put together your basic information.
When determining how much life insurance you need, you’ll want to consider the following questions:
- Does anyone depend on you financially?
- What is your annual income?
- Do you currently have, or do you plan on having children?
- Do you have any other dependents?
- How much do you have in savings and liquid assets? Do not include retirement savings.
- How much do you have in retirement savings and college funds?
- Do you currently have life insurance?
- Do you currently have a mortgage?
- What are your monthly mortgage payments?
- How many more years do you have left on your mortgage?
- Do you have any other debts?
- How much of a financial cushion would you like to give your family?
Step 3: Think about your family.
Do you currently have or are you planning on having any children? If you currently have children, how old is your youngest? Any other dependents? These questions will help you determine how much term life insurance you need.
Term life insurance policies are a smart investment for younger families, as they’re set to expire close to when you achieve major financial life events; things like paying off your mortgage, becoming an empty-nester or when your kids are no longer dependent on your income are just a few examples.
Permanent life insurance, such as whole life insurance or universal life insurance, are other options to consider, but as the name alludes, this kind of coverage is meant to last your entire lifetime. A permanent life insurance policy may be a good option for you if:
- You’re the parent or guardian of a child with special needs
- You’re hoping to provide an inheritance when you pass
- You want to maximize a pension
- You have a high net worth
- Your budget allows for more expensive premiums
Step 4: Consider your assets.
How much do you have in savings and liquid assets, not including retirement? How much do you have in retirement savings and college funds? Do you currently have any life insurance? How much?
Your assets can include:
- Your savings
- Your investments
- Personal property
- Property or land
- Any existing life insurance policies
Asking yourself these questions can help you assess how much wealth you’ve already accumulated that you can pass on to your survivors and how much life insurance would be beneficial.
Step 5: Consider your debts.
Do you currently have a mortgage? Do you have any other debt? Just like we have to determine your assets, we also have to determine your liabilities. Factors like your mortgage payoff date are important to know in order to recommend the length of a term life insurance policy.
Step 6: Think about your preferences.
How much of a financial cushion would you like to give your family? The cost of life insurance will depend on a number of factors, but both the type of coverage and amount of coverage will have an impact.
What’s Next? Buy the Life Insurance Coverage You Want with SelectQuote
Our life insurance calculator is a good place to start when trying to determine how much life insurance coverage might be right for you and your family, but weighing all your options and sifting through the fine print can become time consuming and overwhelming. We can help simplify the process, providing coverage and cost comparisons from some of the most trusted insurance companies in just minutes. We’ll take the time to get to know your needs and find the best life insurance policy options available to you.