I decided to buy $1 million of life insurance at age 29 using a simple equation

I decided to buy $1 million of life insurance at age 29 using a simple equation

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The author is not pictured.

Buying term life insurance is easy, but deciding how much to buy isn't always cut and dried.

Life insurance is an important protection for your loved ones. In a worst-case scenario where you're no longer around, a life insurance payout can keep your family in the same home with the same standard of living as when you were around earning a paycheck.


I bought life insurance in December 2014 and still have the policy today. At the time, I chose $1 million for my policy value, but if I were going to do it again today I would purchase even more. 

Here's a look at how I calculated how much life insurance was enough for my family and what I would do differently today.

There are several ways to choose your life insurance policy value

Every family's financial situation is unique, so there is no rule on what's right or wrong when it comes to life insurance. What's most important is that you get enough insurance so that your family doesn't have to worry about money if you die.


  • Multiple of annual income: Similar to above, but based on your annual income instead of your annual expenses. This is the method I used for my own life insurance.

How I calculated my life insurance needs

I bought life insurance when I was 29 years old. At that point, I had a steady day job with an annual salary. My income had roughly doubled from my first job after college. I expected it to go up in the future, but it was tough to estimate by how much.

I built in hopeful future raises and decided on $100,000 per year as an annual income goal for the policy. I wanted the money to last at least 10 years at that rate, so I decided on a $1 million policy.

For my salary at the time, a $1 million policy would give my family far more than 10 years of income. Based on my finances at the time, looking back, that was a solid decision.


If I were doing it again today

While I don't regret signing up for life insurance when I did, I do wish I had planned better for inflation, future raises, and those important one-time costs I expect in the future.

In addition to a higher income, I now have three kids I want to send to college. I knew ahead of time that I would want kids but hadn't put enough thought into costs that were about 20 years away.

If I bought life insurance again today, I would probably go with $2 million in coverage, just to be safe. The monthly cost for term life insurance is so low compared to the benefit that a $2 million policy may cost a lot less than you think.


I didn't get the very best rates for my current $1 million policy due to a history of asthma, so I pay about $75 per month. For someone with a perfect bill of health, that would have been around $50 per month, a bargain for so much coverage.

Life insurance from work might not be enough

When I signed up for my term life insurance policy, I knew that I might become self-employed someday, but I didn't plan on it happening as quickly as it did. When I left my old corporate day job, I also walked away from a heap of benefits including very cheap group life insurance.

Group life insurance from work is great because you can usually get coverage worth multiple times your annual salary for a bargain price without a medical exam. Going over a certain limit could require additional applications and exams, but you are still likely to get a high level of coverage at a low cost.


But when you leave a job, you can't bring your old employer's insurance with you. Knowing that, it is worthwhile for many people to get even more coverage. You can't count on your employer's insurance forever.

It's important to protect your loved ones

I hope my wife and kids have me around for at least 50 or 60 more years, but there's a very good chance I won't make it that long. My 30-year term life insurance policy expires when I'm 59 years old. Hopefully, by that point, I'll have enough savings that my family won't need life insurance proceeds if anything happens to me.

If anyone relies on you for financial support, it's vital to assess how they would do if you were no longer around. While no one likes to think about dying, life insurance is an important protection for your loved ones. If you have dependents and don't have your own life insurance, you may want to fix that ASAP.


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