How to estimate the life insurance you need in 5 minutes or less

Jeanine Skowronski


Jeanine Skowronski

Jeanine Skowronski

Former Head of Content at Policygenius

Jeanine Skowronski is the former head of content at Policygenius in New York City. Her work has been featured in The Wall Street Journal, American Banker Magazine, Newsweek, Business Insider, Yahoo Finance, MSN, CNBC and more.

Published January 23, 2018 | 2 min read

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Featured Image How to estimate the life insurance you need in 5 minutes or less

Here's a thing that happens: You decide to buy life insurance ... then realize you want to spend little-to-no time thinking about life insurance, since, you know, it only gets used when you die. Unfortunately, life insurance isn't something you just pick off a shelf. Fortunately, settling on the right policy isn't an insurmountable challenge. We've tackled choosing between term life and whole life on a clip. Here's how to estimate the amount of life insurance you need in five minutes or less.

1. Tally your debts

Loved ones don't "inherit" debt, unless they've co-signed on a dotted line or live in a community property state (in which case, a spouse is on the hook for debt incurred during the marriage). But they also can't, say, stay in the family home without assuming and paying the mortgage. Ditto for holding onto a car you haven't paid off yet. So start with the red in your ledger: How much do you owe and how long do you have to pay if off? We suggest getting enough coverage to take care of your longest lasting financial obligation. For most people, that’s a thirty-year mortgage.

2. Fold in future expenses

That includes child or dependent care your family would have to cover without you. Plus, end-of-life expenses and, if you've got kids you were planning to put through college, four years of tuition. For some quick launching off points:

  • A study put the average cost of center-based day care for toddlers in the U.S. at about $9,733 a year, with costs rising up to $18,815 a year in some areas.

  • The average funeral costs about $10,000.

  • As of 2018, half of full-time undergraduate students at public and private nonprofit four-year colleges attend schools where tuition and fees are $11,814 or less, per the College Board. You can go here to get estimates as to what college might cost in 2028.

3. Subtract your savings

Consider liquid savings, investments, retirement accounts, 529 plans (or other college savings vehicles) you've already banked. Depending on your aim and financial situations, these dollars can reduce the amount of coverage you need — or, more pointedly, the monthly premium you'd pay for it.

4. Consider a financial cushion

Obviously, all the expenses associated with having a family aren't captured by "debt" and "future expenses". That's why many people build extra income support into their policy. That decision is intensely personal — and affected by whether you have a working spouse, how long your family might need the protection and if you can afford the premiums associated with upping coverage.

5. Ask for help

A life insurance agent or broker can help fine-tune your policy and pinpoint exactly how much coverage you need (or don't need).

BTW, you don't have to talk directly to an agent if you're not ready to or, you know, in the mood. Our life insurance quoter can crunch all the aforementioned numbers for you — and provide estimates on what ideal coverage would cost.

Image: AleksanderNakic