It’s common to hear people of all ages in different stages of life asking, “Do I need life insurance?” or, “How much life insurance do I need?” For context in 2025, level term coverage for healthy non‑smokers remains broadly affordable: a $500,000, 20‑year policy often runs about $18–25/month for ages 25–30, around $20–30/month at age 35, $40–70/month at age 45, and roughly $110–190/month at age 55, with women typically paying less than men and smokers paying 2–4x more (Policygenius; NerdWallet).
No one likes talking about the possibility of passing, but failing to plan can leave loved ones exposed. Acting sooner typically lowers premiums because age and health drive pricing, and application activity has normalized to modest, fluctuating levels, meaning competitive options are available (Policygenius; MIB Life Index). Higher‑for‑longer interest rates have also helped stabilize product economics—supporting better crediting/dividend scales on savings‑type policies—even as some households face affordability pressure from inflation (AM Best; LIMRA Barometer Study 2024).
What is the right amount of life insurance coverage?
Instead of a one‑size rule, use a goals‑based cash‑flow analysis: project survivors’ expenses by year, subtract their resources (savings, ongoing earnings, employer group life, and Social Security survivors benefits), and size coverage to close the gap. Discount future cash flows using current real Treasury yields rather than a fixed guess to reflect today’s rate environment (FINRA; NAIC; U.S. Treasury real yields).
1. Gather information about your situation. List household members and ages, income by earner, debts and assets, childcare and healthcare costs, existing coverage (including any employer group life), and beneficiary designations. Capture survivor resources precisely—such as SSA survivors benefits (e.g., a child or a spouse caring for a child often receives 75% of the worker’s benefit; a widow(er) at full retirement age can receive up to 100%; family maximums typically cap total benefits around 150%–180% of the worker’s amount) (SSA Survivors).
2. Begin calculating your beneficiaries’ financial needs. Estimate near‑term cash needs (final expenses, emergency fund, debt strategy) and ongoing support (housing, childcare, education). For planning, national medians from the NFDA’s 2024 General Price List Study put a funeral with viewing and burial around $8,300 before cemetery fees, and near $10,000 when a burial vault is included; a funeral with cremation is roughly $7,000–$7,600, and direct cremation commonly $2,500–$3,000 (NFDA 2024 GPL Study). Funeral prices have shown year‑over‑year increases in the BLS “Funeral expenses” CPI series, so include some inflation (BLS CPI – Funeral expenses).
3. Start comparing coverage ranges with costs. Price out policy options that match the need duration. Typical ballparks for healthy non‑smokers buying $500,000 of 20‑year term: women about $18–25/month at ages 25–30 and $18–24 at 35; men about $20–28 at 25–30 and $23–30 at 35; by 45, women ~$40–55 and men ~$50–70; by 55, women ~$105–150 and men ~$135–190. Smokers often pay 2–4x these amounts (Policygenius; NerdWallet). Permanent policies (whole life, universal life) typically cost 5–15x comparable term because they include lifelong guarantees and cash value; higher interest rates can support stronger crediting/dividend scales on new policies (Policygenius; AM Best; OECD).
For someone early in life in their 20’s who is married without kids or much debt, you might not need more than a few hundred thousand dollars of coverage. A common approach is a $250,000–$500,000 level‑term policy sized to cover income gaps and final expenses, with strong term‑to‑permanent conversion options to preserve insurability if needs evolve (NAIC).
As you get older into your late 20’s, 30’s and 40’s, you may start to have kids (or more kids). Additionally, you may accumulate more debt obligations. In these situations, you may end up needing more than just a few hundred thousand dollars. Many families “ladder” policies—e.g., 30‑, 20‑, and 10‑year terms—to match time‑bound needs (mortgage, childcare, college) and reduce overpaying for late‑term protection (FINRA).
As you approach retirement and your loved ones may not be able to work, the amount you need could go up into the high six or seven-figure range. Alternatively, if debts are low and savings, pensions, and survivor Social Security are substantial, required coverage can decline—revisit your analysis when interest rates, inflation, or family circumstances change (U.S. Treasury real yields; SSA Survivors).
Calculate your baseline coverage
Figuring out just how much life insurance you need starts with a transparent, real‑dollar needs analysis. Project expenses and goals, subtract survivor resources (including Social Security survivors benefits), and discount the net cash flows using current real yields. As a quick cross‑check, translating income to a lump sum with a prudent sustainable withdrawal rate (recent research often centers near 4% in today’s rate regime) can sanity‑check results (FINRA; Treasury real yields; Morningstar – State of Retirement Income).
Dependent and beneficiaries
Start the process by figuring out who you’re responsible for financially. For some people, it might just be your spouse. For others, that may include kids, parents, grandparents or others in more unique situations. You’ll need to calculate the amount required for each of these dependents individually and then add them up to get the total amount you need a policy for. Include non‑wage household contributions (childcare, eldercare) that would need replacement if a caregiver dies, and reflect SSA eligibility and family maximum rules for each child and spouse (NAIC; SSA Survivors).
Expenses
The main reason for getting the best life insurance policy is ensuring that the people you love have their expenses covered. Use realistic category assumptions: for college, consult the College Board’s annual trends; for childcare, the BLS “child care and nursery school” CPI subindex informs escalation. Remember, permanent coverage costs are typically 5–15x term for the same face amount because they provide lifetime guarantees and cash value; paying annually can reduce modal fees (College Board; BLS – Child care CPI; NerdWallet).
None of these questions are fun to answer, but it’s important to be realistic. Ideally, we’d love to be able to cover 100% of our loved one’s necessary and discretionary expenses. However, that means an extremely high insurance premium, which might not be in the budget. Calibrate between affordability and adequacy; surveys show cost is the top barrier to purchase for many households, even as protection needs remain high (LIMRA Barometer Study 2024).
Debt
In most cases, valid debts are paid from your estate—not by relatives personally—unless they are co‑borrowers/guarantors or state law creates a spousal obligation (e.g., community property or “necessaries” rules). Collectors may contact the estate representative but may not mislead family members into paying from their own funds (FTC; CFPB). Key nuances to plan for: federal student loans are discharged at death and such discharges are excluded from federal taxable income through 2025; some states conduct Medicaid estate recovery that can reach assets depending on state law; recent state medical‑debt protections limit tools like liens or credit reporting; and SSA can pursue defined overpayments from an estate (Federal Student Aid; 26 U.S.C. §108(f)(5); KFF on Medicaid estate recovery; NCSL – medical debt protections; SSA POMS – Estate overpayments). State rules can also include limited “filial responsibility” or spousal obligations—consult local counsel. Decide whether to fund full payoff of secured debts (e.g., mortgage) or to cover payments for a set period.
Funeral costs
Final arrangements can be expensive. According to the Federal Trade Commission (FTC), its funeral goods and services rule helps you compare itemized prices. The NFDA’s 2024 General Price List Study reports a national median of about $8,300 for a funeral with viewing and burial (excluding burial vault and cemetery fees); with a vault, totals commonly near $10,000. A funeral with cremation is roughly $7,000–$7,600, and direct cremation about $2,500–$3,000 (NFDA 2024 GPL Study). Plan for regional variation and CPI “funeral expenses” inflation when budgeting (BLS CPI – Funeral expenses).
Other considerations
Once you calculate the base coverage that you need, factor in market conditions and policy type. Higher interest rates have lifted crediting/dividend potential on savings‑oriented policies and can temper pricing pressure on some protection products, but inflation and budget constraints remain key for many buyers. Insurers and regulators report that elevated lapses/surrenders in 2023 carried into early 2024 as households sought liquidity, while new savings‑type life sales improved with better crediting; outlooks expect stabilization as disinflation continues (EIOPA 2024 FSR; OECD – Global Insurance Market Trends 2024; Swiss Re Institute sigma).
Quality of life
Covering must‑pay expenses and debts is the foundation, but also decide what quality of life you want to preserve (traditions, activities, relocations). Don’t forget small offsets like Social Security’s one‑time $255 death benefit for eligible survivors, which won’t move the needle but is easy to claim (SSA – If You Are the Survivor).
Retirement
Are you an older individual close to retirement? Coordinate coverage with retirement income sources and survivor benefits. For many couples, a surviving spouse at full retirement age can receive up to 100% of the deceased worker’s Social Security benefit (subject to timing rules). If you plan for a survivor to draw from invested proceeds, sanity‑check income using conservative withdrawal research and revisit as interest rates shift (SSA Survivors; Morningstar; Treasury real yields).
Age and health
While no one can tell what tomorrow brings, insurers price precisely for age, sex, health class, and nicotine use. Women generally pay less, and smoker/nicotine rates can be 2–4x non‑smoker rates; “table” ratings often add ~25% per table for elevated risk. Underwriting method matters too—accelerated/no‑exam programs can be fastest for top risks, while full underwriting can be better for borderline cases (Policygenius).
Risk factors
Outside of your age and health, consider occupational and lifestyle risks. Many carriers treat vaping or certain cigar use as smoker‑class. Growing use of electronic health records in accelerated underwriting broadens access and speed but still requires accurate disclosure; eligibility varies by age/face amount (NerdWallet; Society of Actuaries – Accelerated Underwriting 2024).
Look for important riders
The term rider refers to an enhancement or added feature that you can add to your life insurance policy. Riders help you take a generic policy and add in the elements that you need to customize to make the benefits the most appropriate for your situation. In recent years, “living benefit” riders have become mainstream—accelerated death benefits for terminal and often chronic/critical illness—with clearer triggers, lien vs. acceleration mechanics, and tax distinctions; some permanent policies also offer qualified long‑term care (7702B) or linked‑benefit designs (NAIC – Accelerated Death Benefits; LIMRA 2024 sales updates).
When you’re shopping for a policy, take the time to see what options are available. Some of the more common riders to consider include:
- Accidental death rider – This rider pays out additional money if you pass in an accident. This might be best for younger people who are less likely to pass from natural causes anytime soon.
- Family income rider – With this, your family will be paid a steady flow of income for an agreed-upon number of years after you pass. If you’re worried about the management of funds after you pass, this could be a positive addition to a life insurance policy.
- Accelerated death benefit – This rider can give the policyholder access to part of their policy while still alive if they become terminally ill. It’s crucial to see what does and does not qualify before adding this rider. Additionally, this rider may be included at no additional cost with some policies. For chronic illness benefits under IRC §101(g) or qualified LTC riders under §7702B, understand the triggers, any inflation options, whether benefits reduce the death benefit via lien or acceleration, and the potential tax treatment (NAIC – ADB).
Shop around
The key to getting the best life insurance policy for you and your family is shopping around. With so many options, riders, factors, costs and decisions to consider, it should come as no surprise that every policy is going to be a little or a lot different. Each company looks at and weighs things differently. Get multiple real‑time quotes (especially for term) and verify carrier strength (target AM Best A‑ or better), complaint experience, and service benchmarks using independent sources like AM Best, the NAIC Complaint Index, and J.D. Power’s 2025 study. Market share context from NAIC helps identify established players (NAIC Market Share Reports).
Start the process by determining what you’re looking for. Know roughly the amount of coverage you want, what you’re able to to pay and what riders you might be interested in. Additionally, know what factors you’re willing to bend a little on and what elements would be deal-breakers. Decide on term length(s) and conversion options up front, consider laddering to match time‑bound needs, and remember each rider adds cost; paying annually can lower modal fees (NerdWallet). In today’s higher‑rate backdrop, permanent policies may credit/dividend more competitively, but weigh surrender charges and guarantees carefully before replacing older contracts (OECD; Swiss Re Institute).
From there, find the providers that offer what you want. Begin reaching out to agents to gauge costs, coverage and availability of the options you want. Additionally, take a little time to research the companies themselves. Is the company reputable? Has the company been in business for a long time? Does the company have a good track record of taking care of its customers? Examples by segment: mutuals such as Northwestern Mutual, New York Life, MassMutual, and Guardian are known for participating whole life and advice‑centric service; large stock groups like Prudential, Lincoln Financial, Pacific Life, and John Hancock offer breadth in UL/IUL/VUL and high face amounts (John Hancock’s Vitality integrates wellness); brokerage‑focused term leaders like Banner Life (Legal & General America), Protective, Pacific Life, and Transamerica often price term competitively; agent‑centric brands like State Farm and Nationwide emphasize service and simplicity. Use the independent benchmarks above to compare each shortlist (NAIC Market Share; NAIC CIS; AM Best; J.D. Power 2025).
While it might be tempting to go with a less-reputable company to save money, it could leave your family holding the bag when you pass. The reason you’re getting a policy is to protect them. Make sure you do your due diligence now to protect them when you’re not around. Also watch competitive rhythms: application activity tracked by the MIB Life Index and CPI movement in the BLS “Life insurance” series can hint at pricing dynamics over time (BLS CPI – Life insurance item).
Who might not need life insurance
Young people with no beneficiaries
If you’re young and are unmarried without kids, you might not necessarily need to get life insurance. The purpose of life insurance is to protect your loved ones financially when you pass. If you don’t have anyone that needs your financial help, you may be able to save by passing on life insurance. Still, consider final‑expense planning (direct cremation commonly $2,500–$3,000 at the national median) and any co‑signed obligations; federal student loans are discharged at death and such discharges are not federally taxable through 2025 (NFDA 2024 GPL Study; Federal Student Aid; 26 U.S.C. §108(f)(5)). If you do want coverage, premiums for many healthy 20‑somethings are often in the ~$18–25/month range for $500,000 of 20‑year term (Policygenius).
People with no beneficiaries
Even if you aren’t young, if you don’t have any beneficiaries that depend on you financially, then you might not need life insurance. One caveat to pay attention to here is estate liquidity. Valid debts are generally paid from your estate (not by relatives personally, unless they’re co‑obligors or state rules apply), and some states have Medicaid estate recovery or limited spousal/filial obligations; you may still want liquidity to settle the estate or keep secured property (like a home) in the family (FTC; CFPB; KFF – Medicaid estate recovery).
Affluent individuals
Life insurance provides the funds your loved ones need to cover costs after you pass. If you already have extensive savings and little debt, you might not need to get life insurance. Instead, you may just need a will that properly allocates your funds to your beneficiaries to cover costs. Some higher‑net‑worth households still use life insurance for estate liquidity, charitable bequests, or to address long‑term care risk (via linked‑benefit life/LTC designs), especially in a higher‑rate environment where crediting/dividend scales are more attractive (LIMRA 2024 sales updates; Swiss Re Institute).
Make sure, though, that you do an honest assessment of how much money your loved ones need. Even if they have enough money to make it for the next few years, that might not be enough to help them for as long as they need it. This can be especially important when looking at beneficiaries that are older or near retirement age.
