For better or worse, you know you’re really an adult when it’s time to buy life insurance.
For me, it was right after the birth of our daughter Molly. I bought a term life insurance policy so my wife Lauren wouldn’t have to worry about making ends meet or paying for Molly’s education after I was gone.
But when I went shopping for life insurance, I didn’t really know how much life insurance I needed.
In case you’re like me, we’ve put together a simple life insurance calculator to help you figure out the right amount of term life insurance to buy.
Read more: Deadline vs. Full life insurance: what’s the difference?
Calculator: how much life insurance do you need?
How to Determine How Much Life Insurance You Need
How much life insurance you need is both somewhat subjective and a moving target. Your life insurance needs may be very different today and five years from now.
Simply put, in the event of your death, you want life insurance payments to allow your spouse and children to continue their lifestyle without worrying about money. You can also consider future expenses such as your children’s education.
However, if you have investments or other assets, you may need enough life insurance to make up the difference between your assets and your family’s potential needs.
Here is a simple calculation that is similar to the one we use in our life insurance calculator above.
1. Annual income for replacement: ________________
2. Projected retirement age: ________________
3. Current age: ________________
4. Number of years until retirement (line 2 – line 3): ________________
5. Total income for replacement (line 1 x line 4): ________________
6. Amount for the education of children: ________________
7. Amount to pay off mortgage or other obligations: ________________
8. Total required amount (sum of lines 5-7): ________________
9. Existing non-pension assets: ________________
10. Current life insurance: ________________
11. Necessary life insurance: (line 8 – sum of lines 9-10): ________________
As you get older, earn more money, have kids, and lead a correspondingly more expensive lifestyle, the amount of life insurance you need will increase—up to a point. As you approach retirement age and accumulate more in savings and investments, you will need less life insurance to make up the difference.
Read more: Average cost of life insurance by age
Other Considerations When Buying Life Insurance
Repayment of mortgages and other obligations
In the event of your death, you can make sure that your surviving family does not have to worry about mortgages or other debts. Although they can continue to make payments using the annual income from life insurance payments, you can leave enough money for them to pay off their debts right away.
Many lenders sell insurance policies that will pay off the balance of the loan in the event of death, but it is generally more affordable to purchase a traditional life insurance policy with a higher cost.
Jointly signed loans
If you have student loans or other obligations that have been signed by someone other than the beneficiary of your life insurance policy (such as a parent), you must also ensure that the life insurance policy provides enough to pay off that balance so the guarantor is not burdened with the remaining debt after your death.
Ask your insurer if they will allow you to designate multiple beneficiaries with specific amounts. If not, you will need to make a will that states who gets what.
Read more: Life insurance: is it worth it and when do you need it?
Where to buy life insurance
Polygenius
If you want an easy way to start your life insurance search, check out Policygenius. They now offer term life insurance that does not require a medical examination.
They partner with Brighthouse SimplySelect℠ Offer policies up to $2 million in coverage and you’ll get the same low premiums as companies that require you to pass the exam.
To get started, call Polygenius agent and take their profile by phone. Once you do this, you can be insured in as little as three to four days.
Compare offers from over a dozen insurance companies
Find the best life insurance rates with Policygenius. Start now!
Grant
If you need a quick life insurance policy and don’t want to wait long, Bestow is another great option.
Grant offers life insurance without medical examinations and instant approval. All you need to do is provide some basic information and Bestow will take it from there, using big data to build an offer.
Bestow issues life insurance policies through the North American Life and Health Insurance Company.
Get a quote from Bestow.
Stairs
Ladder offers affordable term life insurance that is easy to understand and quickly set up online. It only takes a few minutes to apply for coverage and you can get an instant decision.
Ladder insurance policies are issued by reputable insurance companies including Fidelity Security Life Insurance and Allianz Life Insurance Company of New York.
Get an offer with Ladder.
Read more: Best Life Insurance Companies: Find the Best Quotes
Summary
So how much life insurance do you need? Enough to allow your surviving dependents to live their current lifestyle for a certain period of time.
Generally, you want your life insurance to cover your children until they are 18 years old. You may also want to provide for your spouse until they reach retirement age. However, you may also need less life insurance if you already have assets, such as investment accounts.
In general, how much life insurance you need is a personal decision that you should make with your spouse and a financial planner if you have one (if you don’t have one, check out our helpful tips for finding the right financial advisor for you). you).
