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Life insurance calculator

Nupur GambhirPat Hanzel

Nupur Gambhir & Patrick Hanzel

Published September 24, 2020

Ready to shop for life insurance? Whether you’re just getting started or ready to compare policies and buy coverage, figuring out how much you need and what it’ll cost you will get you the best policy. Use our free life insurance calculator and tips below to get the coverage you need and calculate the cost of your policy.

IN THIS ARTICLE

How to use the life insurance cost calculator

Our calculator is here to make your life easier. Here’s what you’ll need to get an accurate prediction of your coverage requirements and how much you’ll likely pay in premiums:

Step 1: Enter your age

The cost of life insurance increases 4.5-9% each year you put off buying coverage, based on policies offered by Policygenius in 2020. The younger you are, the lower your premiums — which is why it’s best to buy early if you’re able to.

Step 2: Enter your gender

Women generally pay less than men for the same amount of coverage, based on policies offered by Policygenius in 2020.

Step 3: Enter your zip code

Where you live can determine what policies are available to you based on each state’s rules and regulations.

Step 4: Choose your term length

Your policy’s term length is how long your life insurance coverage lasts. A good rule of thumb is choosing a term length that matches (or exceeds) your longest financial obligation (like your mortgage) so that your loved ones don’t end up liable for those costs.

Step 5: Choose your coverage amount

Most people need 10-15 times their income to cover the financial needs of their family, if not more. Even if you’re temporarily unemployed, you should get enough coverage to account for your anticipated future income.

Once you’ve completed these steps, you’ll receive your estimated policy costs. After reviewing your options, you can click the button to get personalized instant online life insurance quotes and compare policies from top-rated insurers.

Step 6: Pick the type of policy

You’ll have the option of choosing between term and whole life insurance. Whole life insurance is a type of permanent life insurance and accumulates a cash value over time, but it’s usually five to 15 times more expensive than a term life insurance policy, based on policies offered by Policygenius in 2020. Most people opt for term life insurance and look into other means of investing and growing their money, which can also gain more returns.

As Patrick Hanzel, Policygenius’ Advanced Planning Specialist and Certified Financial Planner explains, "Due to the complexity and pricing of whole life insurance policies, term coverage is the recommendation for the vast majority of people. Permanent coverage is usually only suitable for people who have a significant income or assets, complex estate planning needs, or a special needs dependent."

How much life insurance do I need?

Our life insurance calculator is a great way to get an idea of how much coverage you need, but talking to a financial advisor or a Policygenius life insurance agent about your coverage needs can help you get into the nitty-gritty and pick the right policy.

This calculation usually consists of:

1. Adding up your current debts and financial obligations

Accounting for your monthly living expenses, income, and debts you owe and multiplying them by the number of years your family would need support. You’ll also want to think about any future financial obligations, like college tuition.

2. Subtracting your current assets

Thinking about the value of any life insurance policies you already own (if you’re laddering your life insurance coverage) and any future assets like social security benefits.

The remaining number is the coverage gap — the amount your family would need to be financially comfortable in your absence, which is how much coverage you should get as the death benefit. Your policy’s term, or the amount of time your coverage lasts, should last as long as your family’s financial dependence requires.

Two final things to take into account when making a life insurance calculation:

First, the payment your beneficiaries receive is tax-free, so you can use your after-tax (take-home) pay to calculate your income replacement needs.

Second, remember that the death benefit gets paid upfront, but your beneficiaries shouldn’t use it all at once. Much of it can be invested, and the rate of return can provide additional income to make the benefit last longer — but you’ll also want to consider the inflation rate over a 20- or 30-year term. Consulting with a financial adviser and laying out how the death benefit should be spent can better prepare your beneficiaries to take on your financial responsibilities.

If you’re looking for a quick answer to how much life insurance you’ll need, check out our life insurance coverage calculator below:

Cost of life insurance

Life insurance is often a lot cheaper than people think it will be. The good news is that most people overestimate the cost of a term life insurance policy by at least 2x to 3x. There are a number of factors that determine the cost of your premium, including:

  • Age: Life insurance is cheaper when you’re young, and increases 4.5-9% every year you age
  • Health: Any health conditions or unhealthy habits like smoking make life insurance more expensive
  • Coverage amount: The bigger the death benefit you select, the higher your premiums
  • Term: A 30-year policy costs a bit more than a 20-year term policy

Here’s a look at the average monthly rates from the top 10 life insurance companies for a 30-year-old male who is looking to purchase a 20-year term policy with a $750,000 death benefit:

Likewise, the graph below shows the typical premiums for a 30-year-old female who is looking to purchase a 20-year term policy with a $750,000 death benefit:

LIFE INSURANCE COMPANYTYPICAL PREMIUM
AIG$27.36
Banner Life$27.01
Lincoln Financial$39.38
Mutual of Omaha$34.40
Pacific Life$28.11
Principal$27.67
Protective$27.22
Prudential$44.19
SBLI$28.27
Transamerica$34.18

Methodology: Quotes based on policies offered by Policygenius in 2020.

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Due to the complexity and pricing of whole life insurance policies, term coverage is the recommendation for the vast majority of people.

- Patrick Hanzel, Advanced Planning Specialist and Certified Financial Planner

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How to choose a life insurance company

All life insurance companies offer the same financial protection, and thanks to regulations they’re all guaranteed to pay if the worst happens (with some rare exceptions for self-inflicted injury, fraud and crimes). So how to decide what life insurance company you should go with?

Simple: whichever one gives you the best quotes. Life insurance companies offer the same product, but they have different methods for measuring risk. One company may see you as risky to insure, while another may see you as a relatively safe bet. Therefore you may get a wide range of life insurance quotes from different providers — making shopping around with multiple insurers an important part of the buying process.

About the authors

Insurance Expert

Nupur Gambhir

Insurance Expert

Nupur Gambhir is an insurance editor at Policygenius in New York City. Previously, she has worked in marketing and business development for travel and tech. She has a B.A. in Economics from Ohio State University.

CERTIFIED FINANCIAL PLANNER™ & Advanced Planning Specialist

Patrick Hanzel

CERTIFIED FINANCIAL PLANNER™ & Advanced Planning Specialist

Patrick Hanzel is a CERTIFIED FINANCIAL PLANNER™ on the advanced planning team at Policygenius. He has eight years of industry experience and previously worked as an advisor and associate at Northwestern Mutual. He has a degree in Business Administration from Nebraska Wesleyan University, where he was also a member of the golf team.

Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.

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