Life Insurance

Can You Have Too Much Life Insurance Coverage?

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Anyone shopping for online life insurance is bound to ask an important question: "How much life insurance should I have?" And along those lines, can you have too much life insurance?

There's a simple way to know. If your life insurance coverage is greater than your expected needs, you may be paying for too much life insurance coverage. While you can often find affordable policies, they aren't free. The higher the coverage amount, the higher the premiums. 

Securing the appropriate amount of life insurance coverage for your situation is a delicate balance between how much is reasonable to spend on premiums and how large of a policy you want. It's worth considering what you could do with the money you save on rates by purchasing a smaller policy.

If you know what you want your beneficiary to accomplish with the payout from your policy, you can use that to guide how much coverage to get. But when the policy size is greater than its intended use, reducing your coverage and saving on premiums may be a wise choice.

How much life insurance do I need?

There's a lot of leeway in the amount of coverage you should have. Online life insurance providers like Ethos make it easy to find the information you need and get a quote without any hassle. 

You can also speak with a licensed agent to help you work through the process and review your options. It's important to note that the answers to common questions about coverage needs are different for everyone. People have varied plans, goals, and desires for their life insurance policies—these differences impact tailoring a policy that's right for you. 

For example, some experts recommend multiplying your annual salary by 10 and selecting a policy of that size. While this can be helpful, it's worth first considering the specifics of why you'd want a life insurance policy in the first place. Answering these questions can often provide structure to how large a policy you'll need. 

How do you determine how much life insurance you need?

Debt and income replacement are two of the most significant factors to consider when weighing life insurance coverage. You'll calculate how much money is needed to meet that goal for each. This functions as a life insurance needs calculator. When available, employer-provided life insurance can simplify this process by reducing your decisions and lowering the average life insurance cost for the policyholder.

Income replacement

When using life insurance for income replacement, you must decide how many years of income to replace. Take that number and multiply it by your annual income. The total is how much coverage you'll want for income replacement. The thought here is that losing an income earner in a family can create significant financial pressure during an already difficult time. In these cases, using a policy for income replacement can help remove that pressure.


Compile and add up all the debt you currently have. Be sure to include mortgages, credit cards, bank loans, and any other form of debt for which you're liable. The total you've calculated is the amount of life insurance coverage you'll want available to go towards debt. While debt usually passes onto estates instead of other individuals, using a policy payout for debt can help keep the estate solvent for other purposes. 

The final calculation

Combine the coverage needs from debt and income replacement into one number. Next, for greater accuracy, you can subtract the current value of your estate from this number. That's because your assets and finances can pay towards these needs. After that subtraction, the amount of coverage you have left is the minimum amount of life insurance coverage you'll need to meet your goals. You can use a life insurance calculator to get an estimate for how much this coverage will cost. 

Choosing the right type of insurance

Discovering which type of life insurance is right for you can take some consideration. Policies have varied specialties and come with different costs and benefits. For instance, term life is often one of the most recommended policy types. But how much term life insurance do you need if you choose a term policy? Different policies have different available coverage levels, so knowing how much you want ahead of time can help you determine which types may work for you.

Ethos offers both term and whole life policies to qualifying applicants. Term policies cover a broader age range than Ethos' whole life insurance. Both types include guaranteed level premiums for as long as the rates are paid through the term of the policy. 

Term policies are renewable for those eligible policy holders who want to continue beyond their set duration, though premiums will increase upon renewal. Whole life policies with Ethos include guaranteed acceptance for applicants between the ages of 65 and 85.

While each type of policy has its perks, the right policy for you will depend on several variables. Your age and health are among the most important to consider. But you'll also be wise to consider how much you're willing to pay in premiums and what amount of coverage you want. Younger people are often a better fit for term policies, while seniors may benefit more from whole life plans. 

The Ethos life insurance coverage calculator is available to help determine which plan is best for you.

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Coverage amount
Term length
10 years
Please note that all prices quoted are subject to change, including due to underwriting.