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How to avoid buying too much life insurance

Yes, it’s possible to buy too much. Here’s what you should know

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You probably understand the gist of life insurance — you pay a regular premium, and in exchange your loved ones receive a death benefit if you die. Simple, right?

But how much life insurance coverage should you get? And is it possible to buy too much?

Find out how to determine the right amount of life insurance coverage for you and your family. Because it is absolutely possible to buy too much coverage, and understanding why will help you get the right amount for you, without paying too much for it.

In this article:

What to look for when buying life insurance

While it might seem weird for a life insurance agency to warn you about buying too much coverage, our goal is to help you get the best policy for your needs — not the most expensive.

So let’s start by talking about shopping for life insurance. Generally speaking, you’ll need to figure out how much coverage you want to buy before you apply, as that amount will help determine the premium you’ll pay. Depending on your age, your health and where you get life insurance, there might also be a limit on how much coverage you can buy.

The coverage amount of a death benefit is the lump-sum payment beneficiaries receive if you die while your policy is active. This lump sum payout can help cover living expenses, mortgage payments, education costs, and other expenses until your family can fully replace your income.

There are multiple types of life insurance policies, with the two most common being permanent life coverage and term life insurance.

Permanent life insurance

Permanent life insurance is just that: Permanent. Typically, your policy remains in place until you die, so long as you pay your monthly premiums. Many types of permanent life insurance policies, including whole life insurance, accumulate cash value that can be accessed during the insured person’s lifetime. This money can even be used to pay future premiums.

The pros of permanent life insurance include:

The cons of permanent life insurance include:

Term life insurance

Another type of life insurance is term life insurance. It provides coverage for a specified period, typically 10, 15, 20, 25 or 30 years, offering a death benefit to beneficiaries if the insured person passes away during the term. Some of the pros of term life insurance:

Some cons of term life insurance:

How much life insurance do you need?

Choosing the right coverage amount can be challenging, as you might feel tempted to go for a higher amount than your family needs. As a general rule, most experts recommend choosing a death benefit equal to 5 to 10 times your current salary to replace your income for a substantial period.

Individual circumstances might vary, but this rule of thumb is based on several factors and financial considerations, such as your outstanding debts or ongoing expenses (mortgage, car payment, etc.). It prevents you from overestimating future expenses and buying more coverage than your family really needs.

You should aim to maintain coverage while sticking to your household budget. Buying more coverage means higher life insurance rates, so choosing a reasonable death benefit will help keep your payments more affordable.

How to choose a term length

It can be tempting to choose the longest term length because it increases the possibility of your beneficiaries receiving the death benefit. But it’s more effective to use life insurance to cover a period of time when you have a specific financial objective.

Before choosing a policy term, think about what your loved ones would need if you suddenly passed away. Some financial goals you might want to consider include:

For example, if you have a 20-year mortgage, you can opt for a 20-year term life insurance policy, so your beneficiaries will have money to help cover the outstanding mortgage balance.

Use a life insurance calculator to learn more about the coverage you need

Looking for an easier way to figure out how much you need in life insurance? Free calculators like this one from Haven Life can recommend a specific term policy benefit using data points like:

If you don’t know how much life insurance you should purchase, this calculator can be an excellent place to start.

Final thoughts

Bottom line, the amount of life insurance needed will vary from person to person.

You can avoid buying too much life insurance by choosing a total death benefit that’s between 5 to 10 times your salary, opting for term coverage over permanent  coverage, and selecting a suitable term length tied to a financial goal. You might also want to use a life insurance calculator to learn more about your recommended general death benefit.

Start by getting a free online life insurance quote today.

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The answer to that question is easy (which is exactly how Haven Life makes applying for term life insurance)

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About Sarah Horvath

Read more by Sarah Horvath

Our editorial policy

Haven Life is a customer-centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our editorial policy

Haven Life is a customer centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our content is created for educational purposes only. Haven Life does not endorse the companies, products, services or strategies discussed here, but we hope they can make your life a little less hard if they are a fit for your situation.

Haven Life is not authorized to give tax, legal or investment advice. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Individuals are encouraged to seed advice from their own tax or legal counsel.

Our disclosures

Haven Term is a Term Life Insurance Policy (DTC and ICC17DTC in certain states, including NC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively through Haven Life Insurance Agency, LLC. In NY, Haven Term is DTC-NY 1017. In CA, Haven Term is DTC-CA 042017. Haven Term Simplified is a Simplified Issue Term Life Insurance Policy (ICC19PCM-SI 0819 in certain states, including NC) issued by the C.M. Life Insurance Company, Enfield, CT 06082. Policy and rider form numbers and features may vary by state and may not be available in all states. Our Agency license number in California is OK71922 and in Arkansas 100139527.

MassMutual is rated by A.M. Best Company as A++ (Superior; Top category of 15). The rating is as of Aril 1, 2020 and is subject to change. MassMutual has received different ratings from other rating agencies.

Haven Life Plus (Plus) is the marketing name for the Plus rider, which is included as part of the Haven Term policy and offers access to additional services and benefits at no cost or at a discount. The rider is not available in every state and is subject to change at any time. Neither Haven Life nor MassMutual are responsible for the provision of the benefits and services made accessible under the Plus Rider, which are provided by third party vendors (partners). For more information about Haven Life Plus, please visit:

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