Having a Baby > Insurance Crunching Life Insurance Numbers: How Much Do I Really Need?

Team PV

“Fine, I get it Mom and Dad- life insurance is important. So how do I figure out how much I need? And more importantly, how much is this going to cost me? ‘Cuz I’m still waiting for my big promotion.”

That’s the million-dollar question, or rather, the several hundred thousand-dollar question. 

Experts recommend that you purchase a policy worth seven to ten times your gross income… at least. The average American funeral alone costs between $8,000 and $10,000, and you don’t want your family cursing you beyond the grave because you never made these provisions.

Don’t lowball this number. Take that funeral expense, combine it with your existing debt, and factor in potential medical bills or paying off your car loan. You should also figure out your salary in your peak-earning years and estimate how many years it would take your family to replace that income if something happens to you. We’d get more specific, but a reliable insurance calculator is the best way to put together a rough figure.

Another specific answer we wish we could give you is what you’ll pay in premiums. The size of your policy is of course a factor, but we’ll hash out a few of the variables at play here:  

  • Age: Younger policyholder = lower premiums.
  • Occupation/Lifestyle: If you’re a firefighter, a cop, a pilot, or a construction worker, you’ll pay more for your life insurance. If you have a record of traffic violations, you might get smacked with a higher rate. Risky driving puts you in risky situations, and insurance companies aren’t fans of risk.
  • Health: You should know this already, but smoking isn’t doing your health any favors; it doesn’t help your premiums either. Many life insurance companies want to see that you’re in as good health as you say you are and require a physical with your application. So if you have a high BMI, that could be strikes two and three.  
  • Family history: If your parents or siblings were afflicted with heart disease, diabetes, or another ailment that runs in your family, your insurer may increase your rate. 

Rates also vary among insurance companies, so you'll need to shop around for the best rate. If an insurance company has high ratings, like AAA or AA, from one of the Big Three credit rating agencies (that would be Moody's, Standard & Poor's, and Fitch Ratings), that's a great indicator of the insurer's financial stability- they'll be able to pay out over the years- but good ratings could cost you. Use a site like PolicyGenius to compare companies and prices to find the right fit for you.

 

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