Coverage and Cost

How Much Life Insurance Do I Need?

How Long Should My Coverage Last?

How Much Does Life Insurance Cost?

Life insurance calculator

Nupur GambhirAmanda Shih author photo

Nupur Gambhir & Amanda Shih

Published December 1, 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 to calculate the cost of your policy and get just the right amount of coverage.

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 pay between 22% and 32% less than men for the same amount of coverage on average, 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. Choose 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

Policygenius advisers suggest buying coverage of 10-15 times your income, 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 life insurance quotes instantly 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 dependent with special needs."

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 adviser 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

Account for your monthly living expenses, income, and debts you owe and multiply 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

Think 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.

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 more than 3x the actual cost, according to a 2020 study by LIMRA and Life Happens. 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 approximately 27% more than a 20-year term policy on average

Here’s a look at the average monthly premiums from 11 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:

LIFE INSURANCE COMPANYTYPICAL PREMIUM
AIG$35.27
Banner Life$34.76
Brighthouse$33.95
Lincoln Financial$48.83
Mutual of Omaha$42.78
Pacific Life$35.76
Principal$35.54
Protective$34.97
Prudential$57.97
SBLI$35.95
Transamerica$37.41

Likewise, the table 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$27.00
Brighthouse$26.20
Lincoln Financial$39.38
Mutual of Omaha$34.40
Pacific Life$27.98
Principal$27.67
Protective$27.22
Prudential$45.50
SBLI$28.25
Transamerica$29.03

Methodology: Rates are calculated for 30-year-old male and female non-smokers in Ohio, who qualify for a preferred rate class, obtaining a 20-year, $750,000 term life insurance policy. Individual rates will vary as specific circumstances will affect each customer's rate. Rate illustration valid as of 11/04/2020.

quote

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 do you decide which life insurance company to work 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.

Life insurance calculator FAQ:

What factors affect the cost of my life insurance?

The cost of your life insurance depends mainly on your age, health, lifestyle, the length of your insurance term, and the amount of coverage you buy.

How much life insurance do I need?

Policygenius advisers recommend having coverage at least 10-15 times your income, but your total coverage should also account for your debts, future expenses, and any dependents you have.

How long should my life insurance coverage last?

Your coverage should last at least as long as your longest debt, or while you have dependents who rely on you financially.

How do I choose a life insurance company?

Every life insurance provider assesses the risk of insuring you differently, so once you’ve confirmed their trustworthiness and financial stability, choose the insurer that offers you the most affordable premiums.

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.

Insurance Expert

Amanda Shih

Insurance Expert

Amanda Shih is an insurance editor at Policygenius in New York City. Previously, she worked in nonfiction book publishing and freelance content marketing. Amanda has a B.A. in literature and communication from New York University.

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.