How to calculate term life insurance.

Are you considering buying term life insurance? Discover the cost of a life insurance policy from New York Life. Find out about premium rates and the amount of coverage you need.

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Rather than take a one-size-fits-all approach, we can create a combination of term life policies to build a portfolio that meets your specific needs. Since term life insurance comes in a variety of durations—anywhere from one or 10 to 20 years—it’s easy to match your coverage to your actual needs. Plus, you can convert some of your term coverage to long-term or permanent protection if your circumstances change.

Life insurance gives you peace of mind while you're alive and gives your loved one’s financial support when you're gone. It's something you should have if there are people in your life depending on you for everyday living expenses, college tuition, or retirement income. Life insurance can make a huge difference for you and your family, not just financially but emotionally, too. And purchasing a policy sooner, rather than later, will give you more options and flexibility, as well as the financial security for your family if the unexpected occurs. 

Which type of insurance is best? 

There are several different types of policies, but basically there are two broad categories of life insurance: term life and permanent life. What's best for you depends on your needs, and it may even be a combination of products. It’s always best to compare life insurance products before making a decision. 

  • Term life insurance provides a death benefit for a set period, typically between five and 20 years. This is straightforward insurance, and it’s what most people start out with. Certain term life policies can be converted* to permanent policies at a future point, which is a useful benefit if your circumstances change and you need longer-term protection.
  • Whole life insurance
    Whole life insurance offers permanent coverage and includes a cash value component. However, there is not much flexibility when it comes to premiums or the death benefit, so it can be more difficult to fit whole life into a budget. 
  • Variable universal life insurance
    Variable universal policies also offer long-term coverage. With variable universal life, your cash value is invested in a range of options, such as stock and bond investment options, that you choose from those offered by your insurer. The cash value in a VUL policy fluctuates; investment losses are possible due to market risks.
  • Whole, universal, and variable universal life all provide protection for the long term. In fact, whole life even provides permanent coverage. Some policies have more guarantees1 than others, and some give you the opportunity to grow your policy's cash value.

Term life insurance estimate

The amount of insurance you need depends on where you are in your life and who depends on you financially. When you're starting a family, you probably want to have enough to replace your income, so your spouse or partner and children have the support they need. Later in life, when your kids are grown and your house is paid for, you may want to reassess the amount of life insurance you have and focus on final expenses and other needs, like outstanding debt. 

How to calculate the cost of term life insurance

The cost of life insurance is based on several factors: your age, gender, health, lifestyle, and occupation. Regardless of your budget, a financial professional should be able to find a solution that covers your needs at a price that suits your wallet. The following are just some of the factors that determine the cost of your policy:

  • Age 
    Life insurance is less expensive when you’re younger, and premiums increase every year you don’t buy
  • Health
    Pre-existing health conditions or habits, such as smoking, can impact the cost of insurance. 
  • Coverage amount
    If you select a bigger death benefit, your premiums will be higher. 
  • Term
    A life insurance policy with a shorter term usually costs less. 

Customize your term life insurance policy with the following riders

  • Spouse's Paid-Up Insurance Purchase Option Rider2
    With this rider, your spouse, as the beneficiary, can use the proceeds from your policy, in the event of your passing, to get paid-up insurance without a medical exam. This rider is automatically included in most New York Life policies. 
  • Disability Waiver of Premium
    If you become disabled, New York Life will cover your premiums with this rider option, available at an additional cost. 
  • Living Benefits Rider3
    This rider allows you to use a portion of your death benefit to pay for treatment or care if you are terminally ill. 

How much term life insurance do I need?

  • You can use any number of planning tools to get an idea of the amount of coverage you'll need for your policy. The easiest way is to simply take your annual salary and multiply by eight.
  • Another way: Multiply your annual income by the number of years left before your retirement benefits kick in.
  • You can also add up the expenses you think your family will incur after your death, such as a mortgage, school bills, and car costs. Then take your ongoing yearly expenses and divide them by 0.07. That translates to you needing a lump sum of money earning approximately 7% each year to pay those ongoing expenses. Add to that amount the money you'll need to cover one-time expenses at death, and you'll have a rough estimate of the amount of life insurance you need.

As useful as calculators and rough estimates are, they cannot provide you with final answers. Calculators only allow you to perform "hypotheticals," recalculating and generating new results as you make and input new assumptions. 

Using these tools and educating yourself on the workings of life insurance and other financial products, however, can help you feel more comfortable when discussing your needs with a financial professional like a New York Life agent.

You’ve created the right foundation with term life insurance. If your needs have evolved and you want to build toward longer-term financial security, talk to your New York Life financial professional about how easy it is to upgrade to permanent protection and a host of living benefits.

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Want to learn more about term life insurance?

A New York Life financial professional can help determine what’s right for you.


1The guarantees of life insurance are based solely on the claims-paying ability of the issuer. Guarantees remain in place as long as all premiums are paid.  

2Rider Insured’s Paid-Up Insurance Purchase Option in New York.

3Not available in every state. There is a cost to exercise this rider. Products and riders are available in approved jurisdictions, and names and features may vary.

*Conversion guidelines and limitations, such as timing, apply.