How Much Term Life Insurance Do I Need?

The sizing math: start at 10-12x income, then adjust

The standard starting point is 10-12 times your annual income. For a household earner at $150,000, that's $1.5-$1.8 million, a number that surprises people until they do the arithmetic: invested prudently, a $1.5 million benefit replaces roughly $60,000-$75,000 a year of income for two decades. That's what 'replacing your income' actually requires.

Then adjust for your specifics: add the mortgage balance if you want it retired outright, add roughly $100,000-$200,000 per child for college if that's a goal, and subtract liquid savings and existing coverage. Group coverage through work counts, but only while you work there, which is why we treat employer coverage as a bonus rather than the foundation.

• Start: 10-12 × annual income
• Add: mortgage payoff, education goals, outstanding debts
• Subtract: liquid savings, investments, existing personal coverage
• Discount employer coverage; it doesn't follow you out the door

Choosing the term length

Match the term to your longest obligation, not your age. If your youngest child is 3, you have a 20-year obligation. If you just signed a 30-year mortgage, you have a 30-year obligation. When the obligations disagree, the honest answer is often two policies: say, $1 million for 30 years covering the mortgage and baseline, stacked with $500,000 for 15 years covering the expensive child-raising window.

Laddering like this costs less than buying the full amount for the full term, and it means coverage steps down as obligations do, which is the plan working as designed, not a gap.

What it costs at 35-55

Term life is cheaper than most professionals guess. As an illustrative, non-tobacco ballpark: a healthy 35-year-old woman might pay roughly $45-$60 a month for $1 million of 20-year coverage; a healthy 45-year-old man might pay roughly $110-$150 for the same policy. Rates rise about 8-10% for every year of age, and a 30-year term costs meaningfully more than a 20, but locking a 30-year rate at 38 usually beats buying a second policy at 58.

Health class moves the price more than any other factor after age. Well-managed blood pressure or cholesterol often still earns a preferred class with the right carrier, and 'the right carrier' is the operative phrase, because each one draws its class lines differently. The same applicant routinely gets quoted 30%+ apart by two carriers for identical coverage.

The conversion privilege: your option on the future

Most quality term policies include a conversion privilege: the right to convert some or all of the coverage into a permanent policy (with the same carrier, at your original health class) without new underwriting. If your health changes at 50, that option is worth more than everything else in the contract.

Conversion is also how the term piece connects to the accumulation piece of your plan. Some clients convert a slice of term into permanent coverage in their 50s as the mortgage falls away; others simply let the term lapse when the obligations are gone because their IUL already carries the permanent load. Either way, check the conversion window before you buy; many carriers limit it to the first 10-20 years of the term or to before age 65 or 70.

The mistakes that cost families the most

The first is rounding down to a comfortable-sounding number. A $250,000 policy feels substantial and replaces less than two years of a $150,000 income. Size the coverage to the job it has to do, then adjust the term length or ladder to fit the budget.

The second is relying on group coverage. The typical employer policy is 1-2x salary and ends when the job does, often exactly when a health change makes personal coverage expensive. Buy your own base layer while you're healthy; treat work coverage as a supplement.

The third is waiting. Every year of age adds roughly 8-10% to the premium, and a single health event can move you a class or two permanently. The rate you qualify for today is the cheapest it will ever be.

The bottom line

Size the coverage at 10-12 times income adjusted for your mortgage and goals, match the term to your longest obligation (laddering when obligations disagree), insist on a conversion privilege, and buy at your current age rather than a future one. For most professionals in their 30s and 40s, the right term policy costs less per month than a streaming bundle, and it's the piece of the plan your family would feel the absence of most.