How Much Life Insurance Do I Need?

Life insurance can provide your loved ones with additional financial protection if you pass away. As long as you pay your premiums and keep your coverage active, your beneficiaries can receive a sum of money after your passing.¹ When choosing a life insurance policy, you may wonder: How much life insurance do I need? Read on to learn what life insurance covers, different types of policies to consider, and how to calculate the amount of coverage you may need.

3 min. read

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Key Takeaways

When deciding how much life insurance you need, it’s important to consider factors like your income, debts and dependents.
You can calculate the right amount of life insurance coverage using several strategies, such as multiplying your income by 10, employing the DIME method and using Aflac's life insurance calculator.
Aflac offers term, whole and final expense life insurance policies that can help provide a financial safety net for your loved ones.

What does life insurance cover?

Before you calculate how much life insurance you need, it's important to understand what life insurance covers. Typically, a life insurance plan provides a death benefit, which is a sum of money your beneficiaries receive after you pass away.

Your beneficiaries can use this death benefit to help with a wide range of needs, from your funeral costs to everyday expenses. If you have any dependents, they can also use the life insurance payout to help cover their education or childcare.²

Types of life insurance policies

The type of life insurance you choose can impact how much life insurance you need. Aflac offers term, whole and final expense life insurance.

Here’s how these life insurance policies work:

Term life insurance: Term life insurance is a temporary policy that can cover you for a set time period, such as 10, 20 or 30 years. If you pass away after your policy expires, your beneficiaries won't receive a death benefit.³ An Aflac agent can help you estimate how much term life insurance you need and which term length may fit your goals and budget.
Whole life insurance: Whole life insurance covers you throughout your entire life. It also includes a cash value component that allows your premium payments to grow in a tax-deferred account that you can withdraw from or borrow against later in life.⁴
Final expense life insurance: Final expense life insurance is a type of whole life insurance plan that can help cover your end-of-life expenses, such as funeral costs, medical bills and accounting fees.⁵
Universal life insurance: Universal life insurance may also be worth exploring if you want permanent coverage with flexible cash value options.⁶

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Factors to consider when calculating how much life insurance you need

After choosing the right type of life insurance, you can decide how much coverage you need.

Consider these factors when choosing your coverage amount:⁷

Your income: The death benefit payout from a life insurance policy should ideally be able to help provide financial stability for multiple years if you pass away.
Your debts: If you have any debts, such as a mortgage or student loans, your policy should have a sufficient payout to pay them off.
Your dependents: Consider how many loved ones rely on you financially and how long they may need support if you pass away.

In general, higher coverage amounts come with higher premiums, so it’s important to balance your budget with the financial support your loved ones require.

How to calculate how much life insurance you need

If you’re still wondering, "How much life insurance should I have?" these strategies can help you estimate the right coverage amount.⁸

Calculate your financial obligations: Map out any debts or forecasted costs to determine how much coverage you need.
Multiply your income by 10: As a general rule of thumb, you can multiply your gross income by 10 to estimate a sufficient coverage amount.
Multiply your income by 10 and add $100,000 per child: If you have children or dependents, it may be helpful to add at least $100,000 for each one.
Use the DIME method: With the DIME method, you review your debts, income, mortgage and education expenses to estimate how much life insurance coverage your loved ones may require.
Use Aflac's life insurance calculator: Aflac's life insurance calculator can help you estimate your recommended life insurance coverage. Simply fill in your income, debts and other information to get an approximate coverage level.

Is life insurance worth it?

Life insurance can be a worthwhile policy if you want your loved ones to have financial security in case you pass away. The right plan can give you peace of mind, knowing your beneficiaries will have help with expenses and pay off debt in your absence.

If you purchase life insurance with cash value, you can also save up funds over time that you can access while you’re still alive through policy loans or withdrawals. Once you've earned enough cash value, you can use it to:

Supplement your retirement income
Cover large expenses
Make a down payment on a house

Thanks to these features, life insurance can be a worthwhile policy for many people.

Get the life insurance you need from Aflac

Purchasing the right amount of life insurance can help provide your loved ones with a financial safety net. Aflac offers term, whole and final expense life insurance policies for individuals and families that you can tailor to fit your long-term goals and budget.

Chat with an Aflac agent today to learn more about your coverage options and get a quote.

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