Can you have too much life insurance?

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When you shop for life insurance, one question to ask is how much coverage you’ll need. When buying a life insurance policy, you should think about your budget, current income and future needs for your family. This includes existing debts, education, housing and even income replacement.

Even with all these expenses, you may wonder if there’s such a thing as too much life insurance. The answer is yes. It’s possible to overpay for life insurance or to have too much coverage, but you have plenty of opportunities to avoid overpaying. Saving money on life insurance or avoiding paying for too much coverage starts with smart shopping.

How much life insurance do I really need?

Several options exist for your life insurance coverage, including term life insurance that lasts for a specified amount of time (term) ranging anywhere from five to 30 years. Term life benefits are often an affordable life insurance option because the premiums are lower than the other type of coverage, permanent life insurance.

Permanent life insurance, by comparison, does not expire and is meant to provide insurance coverage for the remainder of your life. The two types of permanent life insurance, universal and whole life insurance, often have higher premiums than term life insurance rates for this reason.

Whatever policy option you decide on, factor your premiums into your budget. The best way to avoid overpaying premiums is to figure out how much life insurance you need. Life insurance needs vary from person to person, but a general rule of thumb is to buy 10-15 times your annual income.

The total amount of life insurance you need will likely differ based on your circumstances. Two major ways to help determine your life insurance coverage needs include:

1. Consider your current obligations and expenses.

If something happened to you today, what would it take to replace your current income and cover your existing expenses? Would you want to provide a substantial amount of financial cushion for your family? A basic rundown of your life insurance needs should include:

  • Existing debt, including credit card debt, mortgage payments, and car payments
  • Final expenses
  • Income replacement for a number of years
  • Education expenses for dependents

Most life insurance policies aren’t subject to estate taxes or income taxes, but the cash value may not cover what you think it will. If you find that your current life insurance needs don’t match up with these expenses, this is called a coverage gap. In many cases, you should reduce that gap as much as possible—either through adjusting your existing policy or buying a new one.

2. Use a calculator or trusted financial advisor to decide on the right amount of coverage.

To make the process of shopping for coverage even easier, you can receive a ballpark estimate of your insurance needs by using a life insurance calculator. If you prefer a guided approach, a trusted financial advisor can also help you calculate how much life insurance you should buy. They’ll walk you through the process of applying for coverage whether you’re seeking your very first life insurance policy or shopping for one to supplement your existing insurance.

How often should I adjust my life insurance coverage?

If you already have life insurance coverage, you may be paying too much for your policy. It’s also possible you may not have enough coverage, especially if you’ve recently experienced a change in your life. 

Marriage, having children, starting a new job, opening a business or entering retirement are all instances where taking a look at your current life insurance situation makes sense. If you’ve experienced any major life change in the past few months, you may need to adjust your life insurance coverage.

How can I lower my life insurance rates without changing my benefits?

If your life insurance premiums are currently too high, you still have options beyond changing your current benefits.

  1. Many insurance companies will offer reduced premiums in exchange for switching from monthly to annual premiums.
  1. Making lifestyle changes such as quitting smoking, starting an exercise routine or losing weight can impact your life insurance rates.

Even though your life insurance premiums are set during the initial underwriting process, you can make substantial changes to your premiums through a process called reconsideration1. With reconsideration, you can apply for life insurance rates under a different health rating classification, but based on the age you were when you first applied for life insurance coverage. However, consideration involves retaking the life insurance medical exam after a year or two of your policy being in force.

  1. You can also shop quotes from different life insurance companies to find lower rates without sacrificing your coverage needs.

Will my premiums increase if I buy a different life insurance policy now?

Life insurance costs tend to increase as you get older, so switching insurance policies may lead to increased premiums. Before you cancel your existing policy and try to find a lower priced one, compare all your options. Based on your needs and the available rates, you may not need to decrease coverage.

How do I know if I have too much life insurance?

In addition to comparing your current expenses and future obligations with the total death benefit of your life insurance policy, there are other clues that you may have too much coverage. If the monthly or annual cost of your life insurance policy outstrips your budget, it could be worth considering downgrading your coverage from a whole life insurance policy to a more affordable term life one, or to seek out life insurance quotes for a policy with lower premiums.

SelectQuote Can Help You Buy the Right Amount of Life Insurance and Avoid Paying Too Much

Whether you have too much life insurance coverage or you are paying higher premiums than you’d like, SelectQuote can help evaluate your life insurance coverage and determine next steps. We compare quotes from some of the most trusted insurance carriers at once to help you find life insurance rates that fit your budget and coverage that meets your needs.


We do the shopping. You do the saving.