How Much Life Insurance Coverage Do You Need?

When purchasing life insurance coverage, people will often make an “educated guess” regarding the amount of benefit that they need. In many cases, this estimate is based upon how much coverage is being offered in a group benefits plan, or on how much premium they can easily afford.

While some amount of life insurance is better than having none at all, it is important to have a good understanding of how much coverage you truly need – as it could make a drastic difference in how your loved ones will go on if the unthinkable should happen.

If you were to purchase too small of a life insurance policy, your loved ones could be left with additional expenses and no protection to cover those bills. This could make an emotional situation a thousand times worse.

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Determining Your Need for Life Insurance Coverage

There are a number of ways to determine an approximate amount of life insurance that will be appropriate for your needs. First, the need for life insurance can vary a great deal depending upon the current age and financial responsibilities of the insured.

It can also be dependent on what other assets and income – if any – will be available to the insured’s dependents should he or she pass away. For instance, a young family would likely need life insurance to protect the care needs of the children should one or both of the parents pass away. On the opposite spectrum, older children may wish to seek like insurance protection on their parents, as their insurable interest will be that they will need the life insurance coverage to help with any medical and final expenses when the parent passes away.

Also, the death of a young primary income earner can create some financial hardships for his or her survivors – especially if the insured’s spouse or partner has small children and would find it difficult to enter the workforce while also raising the children.

In cases such as this, the proceeds from a life insurance policy can help in providing an income for the survivor so that they can delay – or avoid altogether – having to go back to work while their children are still infants.

Who Should Consider Having Life Insurance Coverage?

When determining who needs life insurance coverage, it is essential not to automatically rule anyone out. For example, it is often assumed that only those who earn an income need life insurance. However, this is not the case.

Non-income earning care providers of children also play an important economic role in a family. Although the financial value of caregiving is often overlooked, the truth is that should the mother of a small child suddenly pass away, her role would quickly need to be replaced. In this case, considering her numerous roles of cooking, cleaning, and caring for children, the cost to replace all of her duties would likely be quite high.

While just about everyone needs life insurance, some demographics can consider not having life insurance coverage. If you’ve reached the retirement stage of your life, you may have enough money saved up to skip the insurance plan. If you don’t have anyone that relies on your income and you don’t have any massive debts like a mortgage payment, then you can save money by skipping a life insurance plan.

How Much Life Insurance Do You Need?

Before moving forward with the purchase of a life insurance policy, it is essential to assess your survivor’s overall financial needs. These needs should include the income replacement that would be required in order for survivors to maintain their current lifestyle.

Coming up with an accurate figure here will entail adding up monthly debt responsibilities such as rent or mortgage, auto loans, credit card payments, and other personal financial responsibilities.

Also, the estimated final expense costs of the decedent should also be included to determine how much final expense life insurance you will need. These typically encompass the cost of a funeral and headstone, as well as any potential medical bills that would not be covered by the decedent’s health insurance.

Added to one’s current income replacement, the longer term needs of survivors should also be considered. For example, future college education funds, as well as the cost to raise children to adulthood, and long-term housing and utility costs also need to be determined.

Getting the right amount of life insurance coverage is a delicate balance between ensuring that you have enough life insurance protection and not paying for more coverage than you need.

Keeping Your Life Insurance Coverage Updated

Once you have purchased an insurance policy, you need to review your policy regularly as coverage needs can often change. For instance, major life-changing events such as marriage, divorce, the birth or adoption of a child, or the purchase of a new home or business will all constitute a likely change in the amount of life insurance proceeds that your survivors will need.

Even without major changes in your home or family situation, it is recommended that you review your life insurance coverage at least once per year. This is especially the case with term life coverage, as these types of policies have an eventual expiration date upon which coverage will need to be re-qualified for.

Type of Life Insurance Plans

Aside from determining how much, you also need to decide WHAT KIND. The type of plan you buy is almost as important as how much.

We aren’t going to go into intense detail in this article, but we are going to give you a basic understanding of the two kinds of coverage: term and permanent (also called whole).

Our agents have years of experience working with applicants to ensure that they are getting the best plan possible. Unlike a traditional insurance agent, we can sell plans from a bunch of carriers. We work with a lot of highly rated life insurance companies.

Our independent agents can bring all of the best insurance rates directly to you. Each insurance company is different, which means that you could get drastically varying rates depending on which company that you choose. If you have health conditions or are in poor health and want to know how to get life insurance with pre-existing conditions or no exam life insurance, the best idea is to compare rates from dozens of companies before choosing the one that works for you. Maybe you’re concerned because of your age, and you’re searching for senior term life insurance or even affordable high-risk life insurance; we can help.

Your time is valuable, don’t waste it calling dozens of companies. We can bring all of the lowest insurance rates directly to you. No hassle.


Susan Wright, CLU, ChFC, RHU, REBC, ADPA, CITRMS, CIPA has been in the insurance and financial field for over 27 years. Even with years of experience, she continues to create new resources for others. Everything from books to training material.

Susan received her MBA from St. Louis University and her BA from Michigan State University.

She has worked in several areas but excels in writing material for both finances and insurance. Her goal is to give professionals credibility and assist in streamlining the sales process.

She has written countless articles for a variety of websites.

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