How much term life insurance do I need? A guide to insurance at every life stage

How much term life insurance do I need?

Life insurance is like a good pair of boots. When you’re running through your 20s, you might need something lightweight and flexible. By the time you’re navigating the steeper terrain of parenthood, you might need something sturdier, but still affordable. Mid-life, meanwhile, can require a whole different fit.

Whatever stage of life you’re in, you’re probably asking yourself the same question: how much term life insurance do I need?

The Early Career Phase: 20s & Early 30s

In your 20s, you’re likely at your healthiest, which means you can secure a lower monthly cost for your life insurance. Remember, it’s always better to apply while you’re healthy and have no (or few) pre-existing conditions.

When deciding how much life insurance you need, there are a few things to consider:

• Student loans - In the US, federal student loans are typically discharged if the borrower dies. However, private student loans often aren't. If your parents co-signed for you, they could be on the hook for that debt. A small term policy can ensure they aren't left with your balance.
• Employer benefits - Some organizations will provide life insurance as part of the compensation package. However, these tend to be one-size-fits-all policies that only pay our 1x to 2x your salary. If this is less coverage than you need, you might want to consider a small personal policy to bridge the gap.

So, how much term life insurance do I need? Get enough to cover any debts, such as students loans and credit cards, as well as funeral costs. Most people in their 20s and 30s can secure coverage for about the same as a Netflix subscription.

Getting a longer term (10 or 20 years) can also help you lock in a lower rate for longer.

Life Insurance for Young Adults

Want to understand how to approach term life insurance in your early 20s? Check out our guide.

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The Family & Mortgage Phase: 30s & 40s

This life stage can be quite high stakes because you might have a spouse, children, and a mortgage all depending on your income. In order to calculate your ideal coverage, consider the following:

• Mortgage - Can your partner afford mortgage payments without you? If not, consider getting a payout amount high enough to cover the remaining balance on your mortgage. This will ensure your loved ones are not put in a position where they’re facing foreclosure or a forced sale.
• Other debts - Do you have personal loans or credit card debt that your loved ones would inherit? Consider getting coverage that will help them pay off these balances.
• Children - If you have young children at home, you might want a policy that covers you for 20 years or even more! While your children are underage, they depend on your ability to provide for them. Additionally, you might want to consider getting coverage for the years when children are in university to ensure they don’t lose tuition funding.

So, how much term life insurance do I need? Add up important debts including mortgage. Additionally, think of how much your family will need in order to cover essential living expenses while there’s children at home and add this to your coverage amount.

If you have 20 years left on your mortgage and a toddler, a 20-year term is often the perfect fit. It covers the exact window of time where your financial vulnerability is highest.

The Established & Empty Nest Phase: 50s & Early 60s

By this stage, your kids might be finishing college and your mortgage is winding down. You might not need a million-dollar policy anymore, but you still need to protect your spouse’s path to retirement. Additionally, life insurance costs might be significantly more expensive after 50. Affordable coverage might mean choosing a smaller payout.

When designing your coverage, you should consider:

• Funeral costs - Do you have enough savings to cover funeral expenses? According to the National Funerals Director Association, the average cost of a funeral in the US is $7,848. A small policy means your loved ones don’t have to dip into their savings to cover these costs.
• Supporting spouses - If you were to pass away early, would your spouse need support until they can file for social security or access their 401(k)? Consider whether they need coverage to act as a bridge to retirement.
• Mortgage and debt - As you near retirement, it’s also essential to keep in mind any debt your family might inherit. If you have personal loans, credit card, or a mortgage, consider getting enough to coverage to help them pay these off.

So, how much term life insurance do you need? Get a policy that pays off any remaining debt you have with enough left over to cover funeral expenses. If your spouse depends on your income, consider increasing your coverage. It’s important to look at different option in order to determine how much coverage is still affordable.

The Golden Years (65+)

The moment we’ve all been waiting for: retirement!

Most people "outlive" their term insurance, which is actually the best-case scenario! It means the house is paid off and the kids are independent. However, some seniors choose a short term (like 5 or 10 years) to cover specific remaining needs.

• Funeral costs - Remember the average funeral sets a family back about $7,848. A small policy means your family can be reimbursed for any costs associated with the burial or cremation.
• The tax advantage - In the US, the "Death Benefit" (the payout) is almost always income tax-free for your beneficiaries, making this a great way to pass money to heirs. However, tax regulations vary by state and you should always look up the rules in your home state.
• A final gift - Many people choose life insurance as a way to leave a final gift for their loved ones. Payouts can help children or grandchildren achieve the next milestone, including paying for college, saving for a house downpayment, or affording a dream wedding.

So, how much term life insurance do I need? You can choose a lower coverage amount after retirement age, ensuring you have just enough to cover funeral costs and leave a small final gift to your loved ones.

The summary

Ultimately, term life insurance is about buying peace of mind for the years you need it most, ensuring your family’s dream stays on track even if life takes an unexpected turn. By matching your policy length to your major financial milestones—like the duration of your mortgage or the years until your kids graduate—you can secure maximum protection for the lowest possible cost. It is a simple, effective tool that lets you focus on enjoying the present while knowing your loved ones' future is firmly protected.