Determining How Much Life Insurance You Need

December 5, 2017

We all know the importance of having a life insurance policy. Although it is something we do not wish to use too soon, it is there to ensure that the loved ones we will leave behind are protected should something unexpected happen to us.

A basic life insurance, in simple terms, is a contract where a policyholder pays an insurer a premium. In exchange for that, the insured’s chosen beneficiary will receive a sum of money upon his/her death.

There are many benefits to having a life insurance. It should be clear though, that this is not meant for investment purposes. It is there so that our dependents will have enough funds as they go through the hardships caused by your death. The money from the policy is there to support the dependents and to replace the deceased policyholder’s income. Aside from that, a life insurance provides access to immediate cash which can cover the cost of the deceased’s funeral expenses, taxes, and even unpaid debts.

One question remains — How much life insurance do you need?

To answer this, you must take a closer look at how insurance providers determine your insurance premium.

The things they put into consideration when calculating your insurance premium will give you a good idea of your ‘risk level.’ The higher your risk level, the higher the life insurance premium. Moreover, the insurance premium you pay will most likely dictate how much money your dependents will get.

Remember that the company’s goal is to make money on the insurance policy and avoid unforeseen losses. In the underwriting process, They base the premium calculations on a number of determinants. These factors will help predict the onset and nature of future claims.


This may be the primary factor that determines how much life insurance you need. With all other things equal, a policyholder who is younger pays a lot lesser than someone who is older. This is why policy providers recommend buying a life insurance while you are still young.

However, there are still available life insurance policies available for those who are a little older. In fact, it is very important that as you get older you prioritize getting a good one. The older you get, the sooner you may need it.

Current Physical Condition

For this, you have to go through a medical exam. A qualified physician will perform the necessary laboratory tests, examine you physically and perform other diagnostics. They will do procedures like taking your blood pressure, weighing you and running an ECG reading.

If they detect any health concerns that may cause some health problems in the future, you may have to take a more expensive life insurance. If they find out that you are currently in good shape, your insurance rate will be generally lower.

If you have some health concerns, especially those that are incurable, you are in most need of a life insurance. It also is wise to make necessary lifestyle changes to improve your health.

Medical History

This goes for your personal medical history and your family’s. Your medical history will detail any medical issues and problems you have had in the past. This will include hospitalizations, procedures done, treatments and surgeries among others.  If you have had health issues in the past, it will result in a higher insurance premium.

It is also important to check for your family’s medical background. Some health conditions and diseases are considered hereditary. Examples of which are hypertension, asthma, and even cancer. These are called heredofamilial diseases, which means they can be passed down from generation to generation. If you have these diseases, you may have to pay a higher premium.

Mortality and sickness histories help insurance providers predict future claims caused by death or sickness. Moreover, it helps you foresee any future health issues based on these medical histories. If you find out that you are at risk of serious illnesses, you should get a good life insurance.

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One big factor that affects your life insurance coverage and premium is the kind of work you have. There are a number of jobs that are considered ‘risky’ or ‘hazardous’. Examples of these are loggers, truck drivers, and construction workers. These occupational factors lead to a higher insurance premium. However, people with these kinds of jobs are in most need of a life insurance.

When you are exposed to potential danger on a daily basis, you have to have a life insurance coverage more than anybody else. Some companies may shun away from high-risk workers like you, but this doesn’t mean that all insurance providers will refuse to design a policy for you.

Recreation and Hobbies

Are you into extreme sports? Do you go skydiving for the adrenaline? Do you live near the coast and scuba dive often? These recreational activities and hobbies may affect the kind of life insurance policy you get.

Like high-risk occupations, insurance providers may also consider your hobbies and recreational activities high risk. However, each insurer is different; some may not see it the same way. It is a good idea to shop for an insurance policy that still allows you to live the kind of life you want and allows you to have fun every once in awhile.

Lifestyle and Habits

The insurer will check on the kind of lifestyle you have. Do you smoke? How many cigarettes do you consume in a day? Have you had any history of smoking? If you are a smoker, you are to pay more for your life insurance because there are certain health risks associated with such a habit. If you want to quit, quit now! It’s not only for your health, you’ll also save a lot on your insurance.

This is the same for drinking. Insurers may not bat an eyelash when you tell them you drink a glass of wine every night. However, if you are a heavy drinker, that can impact your health negatively.

Any other habit that can have a detrimental impact on health, may result in a higher life insurance premium. Consider a lifestyle change. Drop bad habits and vices. But if you just can’t, take a life insurance, instead. This may not save your life, but it will save your loved ones’ future.

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You may say that this is a little bit biased but it can be explained through scientific studies. In general, women live longer lives than men. This means that women may pay lowers insurance rates compared to men, all other things equal.

Driving Records

Insurance companies may not necessarily ask you to detail any violations or involvements in accidents on your application, however, that may still take a look at your driving record during the underwriting process.

Traffic law violations in the last three to five years may pay for a higher life insurance. If you’re worried that you’ll get a high premium because of one traffic violation, don’t worry too much. If you’ve improved your driving habits since that last violation, you can get a more favorable offer.

Your life insurance is quoted by factoring in these elements. Some of them may be beyond your control. You may get a quote which is slightly different from the actual insurance premium, This is because the factors above will be considered in the actual calculation.


Knowing these determinants makes it a lot easier for you to know how much life insurance you have to get. One other factor that was not mentioned above is “Family.” When looking for a good life insurance, it should be them you must put in mind. Your life insurance is for them; to ensure their future. We all can’t be there for our loved ones forever. So, while we still can, let’s prepare and protect them from the unexpected.

At, you can start shopping for the great life insurance. You can look for good offers and compare rates and policies side by side. If you want to access more resources and tips before you buy a policy, you may also do that here. Are you ready to start shopping? Begin now.

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