How Much Life Insurance Do I Need

How Much Life Insurance Do I Need? | American Family Life Insurance Company

Updated August 2, 2016 . AmFam Team

Here’s how to determine how much life insurance you’ll need to make sure your loved ones’ dreams are protected. 

If you’re thinking about getting life insurance, good for you! You’re making a smart decision to help protect your loved ones’ financial future.

So, let’s get started. How much life insurance should you get? You’ll want to make sure your coverage will help your family handle day-to-day needs and ongoing expenses in the event of a passing. Things like income replacement and paying your mortgage are important things to consider. 

To get a fairly accurate coverage estimate, you’ll have to do a bit of homework, but it’s worth it. You can start by compiling all of your current and projected expenses, including daily needs like food and utilities (you may want to instead use an estimate of how much of your current income your loved ones would need to cover these expenses), as well as bigger costs like debts, housing, childcare, education (don't forget future tuition!), and funeral expenses.

Next, add up your assets, including bank accounts, investments, retirement accounts, CDs and existing life insurance.

After that, subtract the sum of your assets from your total expenses, and the resulting amount will give you an idea of how much life insurance you’ll need.

Once you’ve determined your life insurance needs and are ready to take the next step, your insurance agent (Opens in a new tab) can help you decide what options are smartest for protecting your family’s financial future.

Life Insurance offered by American Family Life Insurance Company.

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  • A nurse giving a life insurance medical exam.
    A nurse giving a life insurance medical exam.
    Life Insurance and Medical Exams

    Are you ready to buy life insurance? Depending on which type of policy you’re applying for, how much coverage you want, and things like your age and health, you might have to take a medical exam. Don’t worry, it can be a quick and easy process — especially when you know exactly what it entails. We’re here to help you navigate the process.

    What Is a Life Insurance Medical Exam?

    The purpose of a life insurance medical exam is to get a snapshot of your health, since your health is one of the main factors a life insurance company looks at when determining your premium and whether you qualify. It’s important to note that the earlier in life you purchase a life insurance policy, the better. Since your health usually declines with age, purchasing life insurance earlier in life could potentially save you money down the road. That’s why it’s encouraged to purchase when you’re young and healthy. And, if you’re purchasing a permanent life insurance policy, you could lock in a lower premium for life! Read more about when to get life insurance.

    An application, an interview, and sometimes a medical exam are required before you can receive coverage. During the exam, you’ll get your height, weight and blood pressure examined, and provide a blood and urine sample.

    To make the testing as convenient for you as possible, you have the option to have someone come to your home or place of work to perform the test for free, which takes only thirty minutes on average. You can also stop into a nearby contracted lab, if you prefer.

    Life Insurance Medical Exam Tips

    When applying for life insurance, you’ll need to answer some health history questions as part of the application process. Here are a few things you should have on hand:

    • Name, address, social security number and driver’s license number
    • Your physician’s name and address
    • Any prescribed medications including dosage frequency and physician
    • Your medical history

    If the coverage you’re applying for requires a medical exam, follow these tips prior to your appointment:

    • Make sure you are well rested with a good night’s sleep
    • Avoid smoking, caffeine and strenuous activity/exercise for two hours prior to your appointment
    • Avoid alcoholic beverages and nasal decongestants for 24 hours prior to your appointment
    • Have a government-issued picture ID (preferably a driver’s license) available
    • Wear a garment that is short sleeved or has sleeves that can easily be rolled up

    What is No Medical Exam Life Insurance?

    Did you know that you can get certain life insurance policies without having to take a medical exam? Appropriately enough, this type of insurance is known as No Medical Exam Life Insurance. With a no medical exam policy, you get a faster approval, and even if you have a preexisting medical condition, there are some policies that may cover you.

    Types of Life Insurance with No Medical Exam

    There are three common types of non-medical life insurance: group, simplified issue and guaranteed issue life insurance policies. Here’s a quick look at each.

    1. Group Life Insurance. With a group life insurance policy, you won’t need to get a medical examination. With a group policy, the rates are based on the group, not the individual, eliminating the need for a medical exam in most cases.
    2. Simplified Issue. With a simplified issue policy, you’ll need no lab work or medical exam. You will have to answer questions from a basic health questionnaire. If your answers are in alignment with the insurance company’s underwriting guidelines, you’ll be eligible for coverage.
    3. Guaranteed Issue. Is a type of whole life insurance that is usually only offered to older adults (50-to-80 years old) but the age limitations vary by provider. With a guaranteed issue policy, you get the benefits of accumulating a cash value over time in addition to skipping out on the medical exam.

    How Much does No Medical Exam Life Insurance Cost?

    One drawback to purchasing a no medical exam life insurance policy is that they can be more expensive. The reason for the cost is that when you waive a medical exam, it negates one of the best predictors of morbidity. When an insurance company is at a higher risk, they increase the cost to help cover the possibility of a life expectancy that may be diminished.

    Can I Get Life Insurance without a Medical Exam with American Family Life Insurance Company?

    Good news! There are some life insurance policies you can get without taking an exam. A great feature of American Family Life Insurance Company’s DreamSecure Simplified Term Life Insurance, DreamSecure Children’s Whole Life and Senior Whole Life policies is a simplified application process, which doesn’t require a medical exam — though you will answer some medical questions. It’s also possible, based on the amount of coverage requested and factors such as your age and health, that you may not need an exam for other products offered by American Family Life Insurance Company, such as DreamSecure Term Life, DreamSecure Flexible Life Insurance and DreamSecure Whole Life Insurance.

    Will I Have to Take Another Exam in the Future?

    If you have a term life insurance policy — meaning your policy is temporary and only lasts for the set amount of years you choose — you might have the option to convert it to a whole life policy during a specific window of time. A great perk when converting term to whole life insurance is not having to take another medical exam to secure permanent life insurance coverage.

    On the other hand, if your term policy expires and you still want life insurance, you may need to apply for another policy and may need to take another medical exam.

    Getting life insurance in place gets you one step closer to helping financially secure your loved ones’ future in case you were to pass away. Get in touch with your American Family Insurance agent to learn more about our life insurance coverages and gain peace of mind that you’re protecting the ones who matter most.

    Policy Forms: ICC18-33 (10), ICC18-33 (15), ICC18-34 (20), ICC18-35 (30), L-33 (10)(ND), L-33 (15)(ND), L-34 (20)(ND), L-35 (30)(ND), L-33 (10)(SD), L-33 (15)(SD), L-34 (20)(SD), L-35 (30)(SD), ICC18-36 (10), ICC18-36 (15), ICC18-36 (20), ICC18-36 (30), L-36 (10)(ND), L-36 (15)(ND), L-36 (20)(ND), L-36 (30)(ND), L-36 (10)(SD), L-36 (15)(SD), L-36 (20)(SD), L-36 (30)(SD), ICC21 L141 MS 01 22, L141 ND 02 22, L141 SD 02 22, ICC17-225 WL, L-225 (ND) WL, L-225 WL, ICC17-227 WL, L-227 (ND) WL, L-227 WL

    Approval is subject to health history and underwriting guidelines.

  • Grandparents and grandkids riding bikes through the forest
    Grandparents and grandkids riding bikes through the forest
    Life Insurance for Children

    You understand the importance of providing a secure financial future for your loved ones, and purchasing a life insurance policy on a child (with the ability to transfer ownership of the policy in the future when the child becomes an adult) can help you do just that. Let’s take a look at how a life insurance policy can help you proactively protect your loved one’s financial future.

    Why Is Children’s Life Insurance a Good Purchase?

    A life insurance policy is a purchase that can last a lifetime. Whether you purchase it on your child or grandchild, there are a number of benefits.

    Low premiums

    Since the cost of life insurance depends largely on things like age and health, purchasing a life policy when they’re young can lock in a low premium for the entire policy payment term.

    Protect their ability to secure life insurance in the future

    One of the biggest benefits of buying life insurance on a child is protecting their ability to secure life insurance in the future. When purchasing a permanent life policy on a child, your policy might include (if not, you might have the option to add) a Guaranteed Purchase Option (GPO) benefit to ensure the opportunity to purchase additional life insurance on them at certain ages and life events down the road without a medical examination or proof of health.

    Build cash value

    A permanent life insurance policy has the ability to accumulate cash value year after year. The earlier you start, the longer cash value can build, so when you purchase a life insurance policy for children when they’re young, the cash value has a lot of time to grow before they may need to use it. And, if ownership has been transferred to the adult child, they can even borrow against their cash value* if needed.

    Should I Purchase Permanent Children's Life Insurance?

    If you’re purchasing life insurance on a child, most people select permanent life insurance since it is built to last the child’s entire life. A permanent life insurance policy provides not only a death benefit, but, as mentioned before, the policy also has living benefits, like the ability to accumulate cash value.

    Purchasing life insurance can be a practical and simple way to help protect your loved ones’ dreams. Check out American Family Life Insurance Company’s DreamSecure Children’s Whole Life permanent life insurance policy to learn more. Or you can also check in with an agent — they’ll be able to answer any questions you may have about children’s life insurance options through American Family Life Insurance Company.

    This is a brief description of coverage and is subject to policy and/or rider terms and conditions which may vary by state. Fixed and guaranteed premiums are statements about the policy as determined at issue, and any changes made to a policy may affect the premium and are subject to our underwriting rules. The words lifetime, lifelong and permanent are subject to policy terms and conditions. DreamSecure Whole Life Insurance policies mature at age 121. Please check with an American Family agent for details on coverages and restrictions.

    *Any loans taken from your life insurance policy will accrue interest. An outstanding loan balance (loan plus interest) will be deducted from the death benefit at the time of claim or from the cash value if surrendered. If the loan balance grows too large for the cash value to support it, the policy could terminate.

    Policy Forms: ICC17-223 WL, Policy Form L-223 (ND) WL, Policy Form L-223 WL, Policy Form ICC17-224 WL, Policy Form L-224 (ND) WL, Policy Form L-224 WL

  • Web_Mother and daughter having a conversation about life insurance
    Mother and daughter having a conversation about life insurance
    The Difference Between Annuities and Life Insurance

    What’s the difference between life insurance and annuities? It’s a common question. If you wonder what it takes to secure a financial future for yourself and those you love, it may be one you find yourself asking. And that’s a very good thing.

    The bottom line: life insurance can help provide your loved ones with the financial peace of mind they deserve if you were to pass away. Annuities provide a tax-deferred way to grow money and provide an income stream. Both should be considered as part of a long-term financial plan.

    Although both share some similarities, the overall purpose of each is very different. Let’s take a quick look.

    Life Insurance Helps Protect Their Financial Future

    When comparing life insurance and annuities, the biggest difference is that life insurance is designed to help protect against a financial loss for others after your death. Annuities on the other hand help protect you financially while you’re still alive.

    Life Insurance helps to financially secure your loved ones’ future, since the death benefit can help with things like replacing your income and meeting important financial needs such as:

    • Funeral costs
    • Daily living expenses
    • Mortgage payments
    • College funding

    When you purchase life insurance, you aren’t purchasing it for you — it’s really a purchase for the people you want to take care of.

    If you want to find the right life insurance for you and your loved ones, American Family Life Insurance Company has the customized options you're looking for. If you want to learn even more life insurance, read up on the specifics of how life insurance works.

    Annuities Help Prepare You for the Future

    Think of an annuity as a tool that could help meet your retirement needs. The primary purpose of annuities is to create income for you, and this can be done in a few different ways. You can set up payments that last for your entire life, a specific period of time or a combination of both.

    There are many potential benefits of annuities. Some include:

    • The ability to grow account value on a tax-deferred basis
    • The potential for a future income stream that can’t be outlived
    • The possibility of a lump sum benefit that can be paid to a surviving spouse

    How do annuities work?

    You can buy an annuity by giving your insurance company either a single lump sum or making payments over time. The insurance company then invests your money — referred to as a premium or purchase payment — in different ways depending on the type of annuity you select.

    You can buy an annuity that begins making payments back to you right away — this is called an immediate annuity — or if you prefer, annuities are available that delay making payments to you for an extended period, sometimes many years.

    Start Planning for the Future Today

    Life insurance and annuities work in tandem to protect a future for yourself and those you care for. Now that you have a high-level overview, discuss with your agent how these options fit your needs.

    Annuities are long-term insurance contracts intended for retirement planning. Annuities are issued by Protective Life Insurance Company located in Nashville, TN, with administrative offices at 2801 Highway 280 South, Birmingham, AL 35223, through a relationship with American Family Brokerage, Inc., 6000 American Parkway, Madison, WI  53783.

  • Image of a young couple reviewing their life insurance policies with their insurance agent.
    Image of a young couple reviewing their life insurance policies with their insurance agent.
    How Often Should You Review Your Life Insurance?

    When you think about why buying life insurance is important, you probably think of financially protecting your family and loved ones in your life when you pass away. With life insurance in place, you can help ensure financial support for those that matter most. But have you spent time reviewing your life policy and ensuring it still meets your needs since purchasing it?

    We recommend reviewing your life insurance every year. Having the right coverage in place means less for you — and those you care for — to worry about. Because so much can happen in 12 short months, it's important to make sure your policy is right for you and your family today.

    To get you started, we’ve put together a list of 9 key reasons why you should review your life insurance policies every year.