Life insurance calculator: How much coverage do you need?

There are many different types of life insurance policies designed for different coverage needs. If you’re wondering “How much life insurance do I need?” a calculator could help. Bankrate’s life insurance calculator helps you hone in on the factors that affect the level of life insurance coverage you may want to buy. We’ll walk you through how to use our calculator and how to find the best life insurance rates for your situation. While a calculator can help you estimate life insurance levels and costs, you may still want to work with a licensed agent or financial planner to ensure that your coverage level fits your needs.

How to use our life insurance calculator

To calculate your life insurance coverage level with our tool, just fill in the required fields above. These include your estimated burial expenses, the number of income-earning years you’ll want to replace for your beneficiary, the net income of your survivors, the values of your current investments and savings, the number of children your survivor will need to support and if you want to account for funding any one-time expenses for your survivors, like college expenses or a gift to charity. Keep in mind that this is a death benefit calculator, which means you are estimating how much life insurance to buy. This tool is not a life insurance premium calculator and won’t show you how much life insurance will cost for you. While you may be able to find a life insurance cost calculator, your best bet is to get a life insurance quote from a company that suits your needs. Only an actual quote will give you an accurate idea of how much your life insurance will cost.

How much life insurance do I need?

1. Decide why you’re buying coverage: To figure out how much life insurance to buy, you’ll first need to understand why you need life insurance. Your reason for purchasing coverage — be it to help a loved one pay off a debt, to replace your income when you are gone or to leave a financial gift — will play heavily into the amount of coverage you purchase.
2. Decide what type of policy you want: There are several different types of life insurance and they all work differently. Knowing what type of policy you’re looking for may help you decide how much coverage you need.
3. Review your annual salary: If you are using life insurance to replace your income for a loved one, you may want to multiply your annual income by the number of years you have until retirement. That way, if you pass away, your loved one will receive a death benefit equal to the amount of money you would have contributed to the household.
4. Think about your debts: If your life insurance is to pay off a debt, you may only need enough coverage to equal the principal amount of that debt. You could also use your life insurance to leave a financial gift for your beneficiaries, in which case the amount is up to you.
5. Decide if you want to leave a financial gift: You could also use your life insurance to leave a financial gift for your beneficiaries, in which case the amount is up to you. You may want to leave a sizable amount to a charity or make your intentions known that your life insurance death benefit should be used to pay for a child’s college expenses.
6. Assess your assets: If you already have significant assets, like a large amount of savings or investment funds, you may not need as much life insurance as someone who has less wealth built up.
7. Work with an agent: If you’re still feeling unsure about deciding how much life insurance to buy, you may want to work with an agent or certified financial planner. These professionals can help you assess your situation and determine what type and level of coverage is right for you.

How to get the best life insurance rates

If you’re trying to calculate life insurance premiums, there’s no better way than to obtain and compare life insurance quotes. Each life insurance company calculates rates slightly differently, so to know how much you’ll pay, you might want to get quotes from a few different carriers. However, life insurance quotes do not vary as much as home or auto quotes, so you should get fairly similar quotes for the same coverage types and levels across carriers.

Understanding the factors that affect life insurance rates might also help you get a lower price:

• Your policy type and limits: As you might guess, the amount of insurance you purchase plays a role in determining what you will pay for your policy. A policy with a death benefit of $3 million, for example, is likely to cost more than one that has a payout of only $500,000. The type of policy you purchase will also play a role. In general, term policies are more affordable than permanent types of insurance.
• Your age: While you can’t do anything about how old you are, even the best life insurance companies use your age to calculate your rate. Simply put, life insurance rates are based on the risk of a company paying your death benefit. The older you are, the more likely you are to pass away during the policy period, so the higher your rates will likely be.
• Your health: To some degree, you can control this rating factor. If you are generally healthy, you’ll probably get a cheaper life insurance premium. If you have chronic health issues, you may want to look for a policy that can be issued without a medical exam, although you should keep in mind that policies that don’t require medical exams may be more expensive to account for the risk.
• Your occupation: Having a career that puts your safety at risk could mean you’ll pay higher rates. These jobs might include law enforcement officers, firefighters and active military members.
• Your hobbies: Just like your job, having risky hobbies could mean you pay higher life insurance rates or that you’re denied coverage altogether. Many applications ask if you are a skydiver, for example, and your answer may preclude you from coverage with certain carriers.
• Your habits: Any habits, like smoking or drug use, that put you at a higher risk for health complications or death are likely to either increase premiums or possibly even exclude you from coverage.

Frequently asked questions

What is the formula for calculating life insurance?

The amount of life insurance you need is unique to you and your circumstances, so there is no exact formula for calculating what you will need. One way to start an estimate is to multiply your salary by the number of years you have left until retirement. This does not take into account, however, any debts you might want to cover with your death benefit, nor does it consider any gifts to charities or one-time costs, such as college tuition for a child.

How long should my life insurance coverage last?

It depends on your needs. If you’re only buying coverage to provide a loved one with financial protection if you pass away before a debt is paid, you may only need coverage for the length of that debt. For example, if you’re covering your contribution to a mortgage payment, a 15- or 30-year term life insurance policy could be a good option, depending on the length of your mortgage. If you know you want to leave a financial gift for your children no matter what, you might opt for permanent life insurance, which lasts until your death (assuming the premiums are paid) and has no term period.

What is the cheapest life insurance company?

There is no single company that is always the cheapest for everyone. Your price of life insurance will depend on your coverage type, limits and personal rating factors. Although life insurance quotes do not vary as much as home or auto insurance, you may still want to compare a couple quotes for reference. Note that insurers are legally not allowed to offer life insurance discounts, so the only significant ways to get cheaper coverage are to reduce your coverage amount or improve your personal rating factors before you apply.

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