Is it possible to have too much life insurance?

Yes, you can be overinsured with more life insurance than you need. Learn how much life insurance you really need, and how to avoid excess coverage.

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Rebecca Shoenthal

Rebecca Shoenthal

Editor & Licensed Life Insurance Expert

Rebecca Shoenthal is a licensed life, disability, and health insurance expert and a former editor at Policygenius. Her insights about life insurance and finance have appeared in The Wall Street Journal, Fox Business, The Balance, HerMoney, SBLI, and John Hancock.

Updated|4 min read

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The best life insurance policy for you will provide enough coverage to support your dependents when you die. The death benefit should cover your income, assets, major debts, and future obligations — including the cost of education for your children, your spouse’s retirement, and your funeral expenses.

But your needs can change. For many people, major life events, such as a new baby or a mortgage, warrant additional life insurance. But other life changes, such as a divorce or grown children, can mean that you need less life insurance than you initially purchased.

If you can still afford the premium and still need some amount of life insurance, there may be no need to make a change. But if your premiums are too high and you don’t need the coverage that goes with them, you have some options to lower your coverage amount — and your premiums.

Key takeaways

  • You should recalculate your coverage needs after any major life event.

  • Your life insurance death benefit should cover your salary, dependents, debts, and other expenses.

  • Most insurers allow you to decrease your coverage after one to three years of owning the policy.

How to adjust your life insurance coverage

For term life insurance and whole life insurance, the two most common types of life insurance, you can generally decrease your coverage amount at least one time during the life of the policy by contacting your insurer.

Some insurance companies won’t let you change a policy until it’s been in force for a year; others make you wait three. And some don't guarantee they’ll approve a coverage decrease when you sign, but usually will depending on the circumstances.

Reducing your term life insurance by company

See how the top term life insurance companies allow you to decrease coverage based on how long you’ve held the policy and how much coverage you own. For all of the companies below, the decrease is priced using your age when you were first insured, which means you won’t be subject to higher premiums due to age or new health issues

Company name                                                                                             

Can you decrease your policy's face amount once in force?

Restrictions                                                      

Minimum coverage                 

AIG

Not guaranteed                                                      

After four years                                                     

$100,000    

Banner Life (Legal & General America)

Yes                                                      

After one year                                                      

$100,000                

Brighthouse

Yes                                                      

After one year                                                      

$100,000      

Lincoln Financial

Yes                                                      

After three years                                                     

$100,000 to $250,000, depending on policy

Mutual of Omaha

Yes                                                      

After one year, one decrease for life of policy                                     

$25,000 to $100,000, depending on policy 

Pacific Life

Yes                                                      

One decrease per year                                               

$50,000           

Protective

Yes                                                      

After three years, one decrease per year                                

$100,000      

Prudential

Not guaranteed                                           

Not specified       

$100,000                      

SBLI

Yes                                                      

Not specified                                                     

$100,000

Symetra

Yes

After one year

$250,000

Transamerica

Yes                                                      

After three months, once per month                                                     

$25,000   

Methodology: Information based on policies from AIG, Banner, Brighthouse, Lincoln, Mutual of Omaha, Pacific Life, Protective, Prudential, SBLI, Symetra, and Transamerica and may vary by carrier, term, coverage amount, health class, and state. Not all policies are available in all states. Valid as of 12/08/2021. 

Universal life insurance

If you have a permanent life insurance policy, you may have even more options. Adjustable life insurance — also known as flexible premium adjustable life insurance or flexible life insurance — is a type of universal life insurance that lets you change your coverage period, premiums, and death benefit. Other policies may allow you to use the accumulated cash value to lower your premiums. Talk to your insurance provider about your options.

How to know if you have too much life insurance

Before you buy life insurance, it’s important to figure out how much life insurance you need. An independent broker or agent can help you weigh your income, debt, and other financial factors to determine the right amount of coverage for your family.

How to re-calculate how much life insurance you need 

After a big life event, reconsider how much coverage you need. Start by looking at your gross salary, which may be significantly more or less than it was when you first signed your policy. Policygenius experts suggest aiming for 10 to 15 times your income.

Then, tally up your long-term financial obligations (expenses and debts) and subtract your resources (after-tax income and liquid assets). That will give you your coverage gap, which is the amount of coverage you need. Don’t forget to add in some cushion for unexpected events.  

Below is one scenario for a 50-year-old female who had minor dependents and a mortgage when she first bought her 30-year term life policy, but no longer has the same obligations. 

Age

Obligations and dependents

Income 

Annual financial obligations + debt

Liquid assets

Coverage Gap

Policy amount        

35 

Minor children, mortgage, spouse

$65,000

$350,000                     

$20,000

$1,000,000 

$1,000,000 

50 

Spouse

$90,000

$175,000 

$50,000

$500,000

$500,000            

In this example, the policyholder is overinsured by $500,000 with 15 years left in her term. Decreasing her coverage amount will help her save money on premiums.

→ Read our full guide to calculating how much life insurance you need

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How to lower your life insurance coverage

If you’ve outgrown your coverage, the first step is to call your insurer or agent. They’ll let you know if you’re eligible to decrease coverage and what restrictions may apply. They can also tell you how your premiums will be affected by the coverage change.

Alternative ways to lower your life insurance premiums

If you need to lower your premiums but don’t want to decrease your policy’s face value, you may have other options. 

Make a lifestyle change

If you’ve made significant lifestyle changes — such as quitting smoking or losing weight — you may be eligible for lower rates under a process called reconsideration.

With reconsideration, you retake the life insurance medical exam a year or two after your policy is in force in order to be eligible for a better health class — and lower premiums.

→ Learn more about life insurance reconsideration and reapplication

Annual vs. monthly premiums

You can also try paying your premiums annually instead of monthly, which can get you a discount between 2% and 5% and save you money in the long run. 

Having too much life insurance means paying for coverage you don’t need, which negates the benefits of having life insurance. Talk to an agent or contact your insurance company to see if lowering your policy amount is right for you. 

Frequently asked questions

Can you have too much life insurance?

Yes, you can be overinsured with too much life insurance. This occurs when your policy amount outweighs your financial obligations minus your assets. 

Is there a limit to how much life insurance you can have?

You can have multiple life insurance policies, but your age, net worth, and income determine how much coverage you’re eligible for with the insurer.

What happens if you outlive your life insurance?

If your term policy expires, you will no longer have life insurance coverage. You may no longer need life insurance, but if you do, you can convert to a permanent policy or buy new term insurance.

Author

Editor & Licensed Life Insurance Expert

Rebecca Shoenthal

Editor & Licensed Life Insurance Expert

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Rebecca Shoenthal is a licensed life, disability, and health insurance expert and a former editor at Policygenius. Her insights about life insurance and finance have appeared in The Wall Street Journal, Fox Business, The Balance, HerMoney, SBLI, and John Hancock.

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