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How Much Life Insurance Do I Need?

How much Life Insurance do I need
Insurance Quotes 2 Day Team

Written By Doug Mitchell

Doug Mitchell, CLU holds a BA degree in Finance from Auburn University, a Chartered Life Underwriter (CLU) designation from The American College in Bryn Mahr, PA and Top of the Table member of the Million Dollar Round Table (MDRT). Doug has spent close to 30 years in the insurance and financial planning industry and has held licenses to sell securities, long-term care insurance, health.  Doug is also a financial blogger addressing the topics of life insurance, annuities and retirement income planning.

Holly Mitchell  &

Holly Mitchell’s background in life insurance insurance goes back to 1985 when she worked for her father who was a New York Life agent. Holly has a marketing degree from Auburn University and has had a life insurance license since 2008. In addition to advising life insurance for customers all around the country, Holly is our website fact checker.

Rob Pinner   &

Rob Pinner is the founder and CEO of Pinner Financial Services servicing all 50 states. Rob started his insurance career in 2002.

Louis LaBash

Results-driven and innovative life insurance professional with 30 plus years of life insurance industry sales and marketing experience. Recognized as a pioneer in the field, leveraging phone and internet channels to exceed personal sales of over $100 million during the first decade of the 21st century. Creator of a highly effective intuitive IUL life insurance sales software that facilitated the sale of millions of dollars of indexed universal policies by numerous life insurance agents. Proven track record as a Managing General Agent (MGA), Life Agent, IUL Life Insurance Sales Software developer, and leading-edge creator of insurance marketing tools, educational content, and delivery systems.

 7 minute read

Aside from ensuring that you have the perfect insurance policy to fit your needs, it’s vital that you have enough coverage for you and your loved ones.  We have a few different approaches to determine how much life insurance you need.

Not having enough life insurance could leave your family with thousands of dollars of debts and other expenses that they don’t have the money to pay for. The main purpose of life insurance for most people is to replace lost income if a breadwinner dies prematurely.

There is a delicate balance between getting enough coverage and not paying for more insurance than you need.  At the end of the day, more coverage is not a bad problem to have.

How can we determine how much life insurance you need?

There are several different schools of thought on how much life insurance one should purchase.

Now that we have discovered that you do have a need for life insurance let us help you understand how much life insurance you may need and then how much life insurance is going to cost you.

How Much Life Insurance Do you Need?


There are three basic calculations that most advisors use today to determine how much life insurance you should have. There is the Rule of Thumb method, the Income Replacement Approach, and the Needs Analysis Approach. We will take a quick look at all of these.

The method I use can be coined as the Capital Preservation Approach and is really a simplification of the Needs Analysis approach. This is what makes the most sense to me.

How much Life Insurance do I need, Rule of Thumb?

This is the simplest method to use and gets to the point rather quickly. This approach suggests that one needs an amount of life insurance equal to 8 – 10 times their annual income. For example, if you earn $100,000 per year, then Rule of Thumb suggests that you would need $800,000 to $1,000,000 of life insurance coverage. While this is very simple and straightforward, it doesn’t take the entire picture into consideration. I will explain.

Income Replacement Approach

By far the most complicated and most accurate method of determining the amount of life insurance that is needed. The Income Replacement approach to life insurance needs analysis is based on the idea that the ultimate objective of life insurance is to replace some or all of the earnings lost if an income-producing family member dies. In other words, the amount of life insurance coverage should equal the value of that person’s future earnings potential to the surviving family. This approach has been used in many wrongful death litigation cases and better determines how much life insurance a person should purchase.

The approach takes into account current after-tax earnings, the projected earnings growth rate, the future working lifetime, and an after-tax discount rate. In addition, there are several adjustments that can be applied to further complicate matters. Computer programs are normally used to arrive at how much life insurance an individual needs with this approach.

How much Life Insurance should I get using the Needs Analysis Approach?

The Needs Analysis Approach consists of two categories. The first category deals with the immediate needs at death such as final expenses, debt liquidation, mortgage cancellation, tax liabilities, educational expenses, and an emergency fund. The second category deals with multiple period income needs such as the surviving spouse, children, and the surviving spouse’s retirement income needs. These two items added together will determine how much life insurance you should have.

How much Life Insurance should I have using the Capital Preservation Approach?

Now hopefully, you understand that true life insurance planning is more than just picking a round number like $500,000 or $1,000,000 and assuming that will be enough. The method that I use and feel is pretty simple to grasp is what I call the Capital Preservation Approach.

We take into account two areas. Just like the Needs Analysis Approach, the first is immediate cash needs at death, and the second is income replacement.

Let me explain.

Assume that you owe $250,000 on your mortgage and $50,000 on other debts such as credit cards and vehicle loans. Let’s take all of your debt and an estimate of final expenses (we will use $25,000 for final expenses).

Next, we take education into account. This step is certainly optional, but let’s assume that you have two children that you would like to provide an education fund for. Currently, four years of public college is around $90,000 (that is $180,000). Last is income replacement.

Let’s assume that your after-tax income is $75,000 per year. I use a reasonable rate of return (currently use 5%) and divide that into your income to come up with income replacement. This is an amount that will continue for as long as the surviving family does.

Doing some quick math:

1 Cash needs at death – $325,000
2 Education Fund – $180,000 (may be optional)
3 Income Replacement – $1,500,000 ($75,000 / 5%)

Total Life Insurance Need – $2,005,000


There should be no doubt that we cover the bases with our Capital Preservation Approach. Not only do we liquidate the family’s debt and provide an education fund for the children, we maintain the same income level for the family. If you think that the income replacement portion is too large or small we can quickly adjust this number.

You may have savings or a current life insurance policy that can offset this amount. Hopefully, you will pay off your mortgage and other debts. Your children will complete their education. As you get closer to retirement, your income replacement may be less due to retirement savings.

You may only need this amount of life insurance for 10, 15 or 20 years.

The message here is that life constantly changes. We can always change your life insurance plan to meet your changing needs. How much life insurance do I need is a popular and important question and we will strive to make sure the death benefit you select will be sufficient to your needs.

Getting Cheaper Life Insurance

Regardless of how much life insurance you need, we can help you find an affordable policy that will cover your family. 

In most cases, the coverage is much cheaper than you would think. There are several things that you can do to ensure that you’re getting the best possible coverage for you and your family.

The first is to improve your health through diet and exercise. Both of these are going to improve your overall health and that translates into lower monthly premiums for your life insurance.

When you apply for life insurance, many companies are going to require that you take a medical exam. The results of that exam are going to play a major role in how much you pay every month.

If you want to get cheaper insurance protection, you need to improve your health. If you’re overweight, then you could end up paying 50% more for your life insurance coverage.

Additionally, you can improve your health by cutting out any smoking or tobacco use in your life.  This includes vaping, which also includes nicotine.  Smokers have a much higher chance of being diagnosed with severe health complications like heart attack, cancer, and stroke.

That means that smokers are going to pose more of a risk to the insurance company. Insurance companies are going to offset that by charging smokers higher premiums. Smokers pay an average of double for life insurance than what a non-smoker is going to pay.

If you want a way to save thousands of dollars on your life insurance coverage every year, quitting smoking is an excellent way to do that.

The best way to ensure that you’re getting the best rates is to compare quotes from dozens of life insurance companies before you choose the one that works best for you. Each company is different and they all have various ways to calculate monthly premium rates and they all offer different plans.

The insurance quotes that you receive from the companies could vary drastically depending on how much life insurance you need.

Finding the best company is the difference between getting an affordable policy and getting one that’s going to break your bank every month.

A great example is that Lincoln National and Prudential will insure cigar smokers and chewers and only charge non-smoker rates.  That means you could save 50% on your life insurance just by choosing the right company.

Instead of wasting your time calling dozens of companies, let us bring the lowest quotes directly to you. Don’t just listen to the advice from people on TV and radio, such as Dave Ramsey’s advice on life insurance, Suze Orman on Life Insurance, or Clark Howard, we are here to personally work with you and your needs to get the best coverage for you and your family.

You never know what life is going to throw at you tomorrow. If something tragic were to happen to you, and you didn’t have life insurance coverage, most families would be stuck with a massive amount of debt and other final expenses, not to mention a loss of a paycheck.

Losing someone close to you is never going to be easy, but being stuck with thousands and thousands of dollars of debt is going to make the whole situation worse.

You don’t have to wait another day to get the life insurance protection that your loved ones deserve.

Studies done by LIMRA show us that only about 60% of people in the United States had some life insurance.  1 in 5 Americans say that they need more life insurance.

Studies have also shown that people overestimate the cost of life insurance, especially younger generations.  Those studies reported that 44% of Millennials estimated the cost at five times the actual cost.

If you’re worried about not having enough life insurance coverage for your family, use the life insurance calculator on this page to see your rate.


How much does life insurance cost?

To give you an estimate of how much life insurance costs, we are providing a chart that illustrates the rates for a $100,000 policy for Term life, Universal Life, and Whole Life insurance for a healthy male non-smoker:


Age 30-Year Term Universal Life Whole Life
20 $13.42 $47.60 $67.38
30 $13.59 $64.21 $94.85
40 $20.38 $83.11 $138.25
50 $43.05 $115.13 $209.83
60 $100.10 (25-Year Term) $180.08 $334.78

This chart illustrates the rates for a $100,000 policy for Term, Universal Life, and Whole Life insurance for a healthy female non-smoker:

Age 30-Year Term Universal Life Whole Life
20 $11.55 $41.43 59.24
30 $11.97 $60.40 $83.21
40 $16.47 $78.01 $120.66
50 $34.43 $110.37 $184.36
60 $73.24 (25-Year Term) $175.76 $292.58

To get an accurate quote for your actual age, start by using the calculator on this page. 

Frequently ask Questions

How much is term life insurance?

how much life insurance do I need

Your final rate for term life insurance is based on several rating aspects:
Your attained age at the time of application
Your current health status and your medical history
Whether you use tobacco products or smokeless tobacco products
The amount of insurance coverage that you require
The policy period that you prefer (10, 20, 25, or 30-years)
Other underwriting aspects like occupation, travel plans, and lifestyle

How much life insurance should I get?

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The amount of life insurance you should purchase should depend on your ‘need’ for life insurance and what will comfortably fit in your budget. For example, many applicants want to purchase enough life insurance to replace their income so that surviving loved ones can continue with their lives and not stress over finances. Other applicants purchase a specific amount to cover specific life events like paying off a mortgage, paying for college tuition, or making certain there is enough money to fund a surviving spouse’s retirement plan.

How much is whole life insurance?

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Just like term life insurance, your rates for whole life insurance will depend on various underwriting aspects concerning your ‘need’ for insurance and your monthly budget. Since whole life insurance is permanent coverage and the policy will build cash value over time, whole life insurance rates are higher than term insurance which is temporary coverage and has no cash value.


author avatar
Doug Mitchell, CLU Independant Advisor
Doug Mitchell, CLU holds a BA degree in Finance from Auburn University as well as having obtained a Chartered Life Underwriter (CLU) designation from The American College in Bryn Mahr, PA. Doug has spent almost 30 years in the life insurance industry and has also held licenses to sell securities, long-term care insurance and home and auto insurance. Doug is a Top of the Table Million Dollar Round Table member (MDRT).  MDRT is a global, independent association of the world's leading life insurance advisors.  For two years, Doug served as President of the Auburn Opelika Association of Financial Advisors and has been a member of the Million Dollar Round Table. He obtained Life Millionaire status at Horace Mann Insurance Company and was awarded the Life Agent of the Year Award. Later in his career with New York Life he was an Executive Council Member. Doug currently serves as President of Ogletree Financial, a managing general agency serving life insurance agents and clients in all parts of the United States. Today, Doug’s main focus is servicing 1000s of policyholders and growing the agency through the reach of