How Much Term Life Insurance Do I Need?

“How much term life insurance do I need?” Pretty much all of our clients have asked this at some point. We’ll show you what you need to consider, and give you two different ways to figure it out: the fast, easy way that might not be as accurate, and the longer, slower way that will give you a more precise idea of how much coverage you need. Let’s get started!

Young mom and dad with their little daughter on dad’s shoulders

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Term Life Insurance: Estimate Method #1

Term Life Insurance: Estimate Method #2

How Much Does Term Life Insurance Cost?

Many Clients Can Double Their Coverage For a Few Dollars More

Term Life Insurance: Estimate Method #1

Young woman getting a quote for term life insurance on her laptop

The shortest and easiest way to do a rough estimate? Multiply your yearly income by 10. Here’s an example:

$50,000 per year x 10 = $500,000 in term life coverage

This is just a general guideline. It doesn’t take into consideration the size of your family, your current financial situation, or exactly what you want the death benefit to cover. But if you just want to get a quick online quote, start with this as a rough estimate for how much coverage you might need.

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Term Life Insurance: Estimate Method #2

Okay, let’s get a little more detailed. Grab a pencil and paper or your favorite notes app, because it’s time to jot down some numbers and do a little bit of math.

Senior man using his laptop to search for answers to the question, ‘How much term life insurance do I need?’

Step 1: Look at the financial assets you have

1a. What is your annual income? Even if you and your spouse are both shopping for policies, just use your annual income for this estimate, not your combined household income. You’ll each have to apply individually, so keep your estimates separate for now. Here’s an example:1a, annual income: $50,000

Young couple using a calculator to add up their total savings and investments

1b. How much in savings/investments do you currently have set aside? Figuring this out will help you avoid buying too much coverage. Are there savings accounts your spouse or beneficiaries could use to pay bills if you passed away? Do you have stocks or a retirement account they would inherit? Keep in mind that, even with a will that clearly explains what you want to leave to whom, that will needs to go through probate before your assets can be dispersed. Probate can take months or even years, if there are problems or disputes among your heirs. What would your family members have to live on in the meantime? Here’s an example:

Savings account: $12,000
Stocks, bonds, investments outside a retirement account: $5,000
Retirement accounts (401k, IRA, etc.): $55,000
1b, total savings & investments: $72,000

Step 2: Look at your expenses, obligations, and debts

Now, let’s make a list of what you want your policy’s death benefit to cover for your loved ones. If you died today:

Mom and two daughters putting coins in a piggy bank

2a. How many years of income would you need to replace? Many of our clients want to replace their income for long enough to cover expenses until the youngest child is 18 or 21. If your youngest child is 5, that means you’d probably want to replace your income for about 13 or 16 years.

2a, years of income: 13 years

2b. What expenses and debts would need to be covered? Think about what debt you might be leaving behind. Do you have a car loan, credit card debt, or student loan debt? Do you want to pay off the mortgage? Do you want to leave behind any extra money for the kids to go to college or to help pay for their weddings? It’s all up to you and what you want or are able to do for your loved ones. Here’s an example:

Woman making a list of all the expenses she wants her term life insurance policy to cover for her kids

Amount left on your mortgage: $230,000
Credit card debt: $2,000
Car loan: $15,000
Student loan: $5,000
Other debt: $0
Kids’ college tuition: $25,000 x 2 = $50,000
Kids’ weddings: $10,000 x 2 = $20,000
2b, total expenses and debts: $322,000

Step 3: Make your calculations

3a. Multiply your annual income (1a) by the number of years you want to replace that income for your loved ones (2a). Here’s an example:

$50,000 x 13 years = $750,000

3b. Take your total expenses and debts (2b) and subtract your savings/investments (1b). Here’s an example:

$322,000 - $72,000 = $250,000

3c. Add your results from (3a) and (3b). This will give you a total estimate for the amount of money you want to leave your family to cover lost income, pay debts, and leave cash for future expenses. Here’s an example:

$750,000 + $250,000 = $1,000,000 in term life insurance coverage

Woman using a notebook and calculator to estimate how much term life insurance she needs

See how different the estimate from our second method is from the first method? The first method – resulting in an estimate of $500,000 of coverage – wouldn’t leave your loved ones quite enough to do everything you might want them to be able to do. That’s why it’s worth taking a few extra minutes to do the more detailed estimate!

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How Much Does Term Life Insurance Cost?

Since our estimates above generated figures of $500,000 and $1,000,000, let’s see what those policies would cost based on a few sample details. This will help you see how affordable even large amounts of coverage can be!

$500,000 term life policy

A happy dad walking in the woods with his son on his shoulders

Male, age 30, non-smoker, Nevada resident, best health class, 30-year term: $30 - $49/month

Male, age 40, non-smoker, Ohio resident, best health class, 25-year term: $43 - $107/month

Male, age 50, non-smoker, Texas resident, best health class, 20-year term: $71 - $127/month

Male, age 60, non-smoker, Montana resident, best health class, 15-year term: $151 - $284/month

Female, age 30, non-smoker, Virginia resident, best health class, 30-year term: $25 - $43/month

Female, age 40, non-smoker, Wisconsin resident, best health class, 25-year term: $34 - $84/month

Female, age 50, non-smoker, New Jersey resident, best health class, 20-year term: $55 - $93/month

Female, age 60, non-smoker, Louisiana resident, best health class, 15-year term: $104 - $197/month

$1,000,000 term life policy

Male, age 30, non-smoker, Nevada resident, best health class, 30-year term: $52 - $88/month

Male, age 40, non-smoker, Ohio resident, best health class, 25-year term: $77 - $202/month

Male, age 50, non-smoker, Texas resident, best health class, 20-year term: $133 - $234/month

Male, age 60, non-smoker, Montana resident, best health class, 15-year term: $295 - $527/month

Female, age 30, non-smoker, Virginia resident, best health class, 30-year term: $40 - $76/month

Female, age 40, non-smoker, Wisconsin resident, best health class, 25-year term: $62 - $161/month

Female, age 50, non-smoker, New Jersey resident, best health class, 20-year term: $96 - $169/month

Female, age 60, non-smoker, Louisiana resident, best health class, 15-year term: $198 - $360/month

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Many Clients Can Double Their Coverage For a Few Dollars More

Term life is the most affordable type of life insurance on the market. And oftentimes, insurers give big price breaks for higher amounts of coverage. Some of our clients can double their amount of coverage for less than double the price of the policy they were originally quoted. As a quick comparison, we pulled out two lines from the rates quoted above to highlight this:

Mom giving her daughter a piggyback ride

Male, age 40, non-smoker, Ohio resident, best health class, 25-year term
$500,000 policy: $43 - $107/month
$1,000,000 policy: $77 - $202/month
It could be as little as $24 more per month for this client to double their coverage!

Female, age 30, non-smoker, Virginia resident, best health class, 30-year term
$500,000 policy: $25 - $43/month
$1,000,000 policy: $40 - $76/month
It could be as little as $15 more per month for this client to double their coverage!

If you’re raising a family, you know every dollar counts. But imagine doubling the final gift you were able to leave them…for less than the cost of a restaurant meal per month. It could be that easy and that affordable with term life insurance.

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Quotes valid as of 7/28/23. Quoted carriers include Transamerica, Banner Life, Protective, American General, Pacific Life, Cincinnati Life, Haven Life, Principal, Lincoln Financial, Assurity, SBLI, and more. Your actual term life insurance premium can only be determined by a full application and the carrier's underwriting process, which may include some medical testing at their expense. Depending on the carrier, premiums can be paid on an annual, semi-annual, quarterly or monthly basis. Monthly premium rates may be available via EFT (electronic funds transfer). Not all carrier policies are available at all durations for all ages in all states.