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How Much Life Insurance Should I Have

This calculator helps you decide how much life insurance you should have.

Life insurance is often one of those “difficult topics” to discuss. In part this is because any important decision related to our mortality is generally uncomfortable to confront and process. However, life insurance is also a difficult topic because the majority of Americans know they need life insurance, but are painfully aware that they do not currently have enough to adequately provide for the needs of their family. Currently, in America, there is large gap between the amount of life insurance that is needed, and the amount of life insurance that is actually owned.

The vast majority of American consumers – 85% - believe they need life insurance to provide for their family’s needs in the event of their death.  And, in general, this belief is well-founded. In the event of the primary wage-earner’s death, 70% of families with kids under 18 would have trouble meeting their everyday living expenses within a couple of months, and 40% would have trouble immediately. 

Despite this recognized need, however, only 44% of U.S. households actually have life insurance. While this gap is significant, what may be even more striking is the trend of life insurance ownership. The current 44% is a 50-year low, down from 55% of U.S. households in 1992, and 72% in 1960!

Even for those owning life insurance, a gap exists between the amount they need, and the amount they actually own. 40% of those consumers who currently have life insurance don't think they have enough.  And, in general, they are right: in America today, there is $15.3 Trillion in unmet, unfunded life insurance need.

The question then becomes: “why not?”. Part of the reason is that consumers have other competing financial priorities. Another big component, though, is that consumers think it is too expensive. 83% of consumers don’t purchase more life insurance because they think it costs too much. However, much of this perception is misinformed. On average, consumers think life insurance costs 3X more than it actually does! For example, consumers expect, on average, that a 20-year, $250,000 life insurance policy for a healthy 30 year old would cost $400 per year. In actuality, this policy would average $150 per year.

Consumers could develop realistic expectations about the amount of life insurance they actually need, and the amount this life insurance would actually cost, by doing a simple calculation using a Life Insurance Calculator below. While this will provide some general direction, it is always wise to seek advice from a professional financial advisor to make a final decision as to which is the best option for you.