How Much Life Insurance Do I Need in My 40s?
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If you’re in your 40s and don’t have a life insurance policy yet, it’s not too late. Or, if you have a policy already, you might be considering purchasing additional coverage or converting your existing policy. We can help you find the path forward no matter where you're starting from.
In this article
Types of life insurance
Before deciding on the amount of life insurance you need, it’s important to understand the different types available to you. At this stage of life, you might be looking for different coverages than you would have in your 20s or 30s. You might also be in a different financial situation than in the past and have a larger budget to spend on your policy. Look and see which type of policy seems the best fit for you.
Term life insurance
Term life insurance is a popular option for people in their 20s and 30s. It’s the most affordable type of life insurance and is a good way to “get your foot in the door,” so to speak. These policies last several years – known as the term – before expiring. Most life insurance companies offer 10-year, 20-year, and 30-year terms.
A few things can happen when a term life insurance policy expires. The policyholder may convert the policy to a permanent life insurance policy with a fixed insurance premium. Or, the life insurance company may allow the policyholder to renew the term life insurance policy annually.
One thing to keep in mind as a 40-year-old is that you should look closely at the fine print if you’re considering a term life insurance policy. Some policies have an age limit, after which you can no longer convert or renew your term life insurance policy. If you purchase a term life insurance policy with an age limit, you’ll want to make sure that you’ll be under the age limit when your term expires.
Permanent life insurance
Permanent life insurance policies last for the entire lifetime of the insured person. This allows for more certainty than a term life insurance policy, and in a way, more flexibility as well. Also known as whole life insurance policies, permanent life insurance allows you to use your policy to build cash value over time.
The cash value of the policy is separate from the death benefit that gets paid out to the beneficiaries of the insured person. It can be used to build retirement funds or to fund a loan once the cash value is large enough. You can also use the cash value to pay your insurance premiums.
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Why get life insurance in your 40s?
Providing financial protection for your family
In your 40s, you're likely to have significant financial responsibilities, including supporting a partner, children, or even aging parents. Life insurance acts as a safety net, ensuring that in the event of your untimely demise, your family's financial needs—from daily living expenses to long-term goals—are covered. It's a critical step in financial planning, offering peace of mind that your loved ones will be financially secure.
Paying off debts to protect loved ones
Many individuals accumulate various forms of debt throughout their lives, including mortgages, car loans, credit card debts, and student loans. Without life insurance, these debts can become a burden to your family, potentially jeopardizing their financial stability. A life insurance policy ensures that any outstanding debts are covered, preventing your loved ones from facing financial hardship or losing assets, such as a family home, to settle debts.
Leaving an inheritance as a legacy
Life insurance can be strategically used to leave a significant inheritance to your children or other beneficiaries. It's not just about covering immediate financial needs; it's also about investing in your family's future and ensuring they have the resources to pursue their dreams, whether that's higher education, homeownership, or starting a business. This can be particularly important if you haven't been able to save as much as you would have liked; life insurance can provide a substantial financial legacy.
Covering final expenses to ease family burdens
The costs associated with final expenses — such as funeral arrangements, burial or cremation, and any outstanding medical bills — can be surprisingly high, often placing a significant financial strain on families during a time of grief. By securing a life insurance policy, you can ensure that these final expenses are covered, relieving your family from the financial stress and allowing them to focus on supporting each other and honoring your memory.
Additional considerations
- Tax advantages. Life insurance payouts are generally tax-free, offering an efficient way to transfer wealth to the next generation without the burden of income tax on the beneficiaries.
- Health care and long-term care needs. As you age, the potential need for long-term care services increases. Some life insurance policies offer riders that allow you to access part of the death benefit for long-term care services, providing flexibility and added value.
- Fixed premiums. Obtaining life insurance in your 40s often allows for more affordable premiums compared to later in life, especially if you're in good health. These premiums typically remain fixed, providing cost certainty and allowing for easier financial planning.
Up to $2 million in coverage
- Get covered in 5 minutes.
- 95% of customers approved.
- No Hassles. No Gimmicks. Easy Application.
- Non-Commissioned Agents.
- Ages 20+
- 100% Online Application.
- Fast Coverage.
How to calculate how much life insurance you need
You may have heard before that a good rule of thumb is to purchase a policy that provides 10 to 15 times your annual income. This is a good place to start, but your life insurance needs depend on several factors, including:
- Current expenses. Think about your current monthly expenses, including your rent or mortgage payments, utility bills, and so on.
- Future expenses. Your life insurance policy is meant to last for a decade or longer, so don’t forget about your future goals. If you plan to purchase a house or bring children into the family, the financial goals should be factored in.
- Current debts. Take a look at the financial obligations you currently owe and what might be transferred to your loved ones if you pass away. This is especially important if you have a cosigner on any of your loans.
If you have a partner or dependents who rely on your income for day-to-day expenses, consider how much they would need to have for financial stability if you were gone. A good way to do this is to consider how many years of your annual income you would want to provide as your “income replacement” to help them transition to the next stage of their lives.
Best life insurance companies for 40-somethings
With so many life insurance companies out there, how do you choose? It’s a good idea to get life insurance quotes from a few companies so you can compare your options.
Legal & General
Legal & General has a lot to offer, especially when it comes to term life insurance. The company offers a wide range of terms, including 10, 15, 20, 25, 30, 35, and 40-year policies. Term life insurance coverage from Legal & General is available up to the age of 75, leaving plenty of room for longer terms.
L&G term policies start at $100,000 and are designed to provide families with coverage for final expenses and income replacement. At the end of the term, policyholders can either renew or convert to a permanent life insurance policy. You can also add term riders, children’s life insurance riders, and an accelerated death benefit rider to the policy.
Universal life insurance policies from Legal & General can also be a good choice. The premiums for these policies are flexible, which can be helpful because you can pay more now and then lower life insurance premiums once you hit retirement. The account value also comes with a guaranteed minimum interest rate, so you’ll know how much you can earn from the policy’s cash value.
State Farm
State Farm is a popular name in insurance and can be a great choice, especially because it offers several policies. The company even offers no medical exam policies for qualified applicants. This makes the process quicker and more straightforward.
Select Term Life insurance policies from State Farm are available for 10, 20, and 30 years. The policies can only be converted if you’re under the age requirements, so this is something to be aware of before you choose a term length. You can also add a couple of riders to the policy – the Children’s Term Rider and the Waiver of Premium for Disability Rider.
State Farm also offers several permanent life insurance policies. This includes policies with flexible premium payments, such as a limited-pay life insurance policy that allows you to pay premiums for only 10, 15, or 20 years. Some policies are designed to tackle final expenses alone, including the Guaranteed Issue Final Expense policy.
If you have a partner, State Farm has a couple of policies you might be interested in. There is a Survivorship Universal Life Insurance policy, which can be helpful to set up financial protection for your children. This policy pays out the death benefit when both parties (you and your spouse) pass away. The Joint Universal Life Insurance policy is another option – it covers you and your spouse and pays the death benefit when one of you passes away.
Nationwide
Nationwide is another popular life insurance company with a lot to offer. Like most life insurance providers, the term life insurance policies can go up to 30 years, after which the policy can be converted. However, the policy can only be converted if you’re under 65 when the term expires.
The permanent life insurance policies from Nationwide offer several options. Some policies offer flexible payment options, including variable universal life insurance and universal life insurance policies. All the permanent life insurance policies also provide a cash value to your policy.
In addition to traditional life insurance coverage, Nationwide offers long-term care coverage. This can help cover long-term supportive care in a home setting. It can help with various needs, from adult day care to assisted living or full custodial care services.
Up to $2 million in coverage
- Get covered in 5 minutes.
- 95% of customers approved.
- No Hassles. No Gimmicks. Easy Application.
- Non-Commissioned Agents.
- Ages 20+
- 100% Online Application.
- Fast Coverage.
FAQs
How much life insurance coverage do I need?
The amount you need depends on your financial obligations, such as debts, income replacement needs, mortgage, and future expenses like education for your children. A common rule is to have coverage that's 10 to 15 times your annual income, but this can vary based on individual circumstances.
Can I change my life insurance policy?
Yes, changes are possible. For term life, you might be able to increase your coverage or convert to a permanent policy. With permanent life insurance, you have more flexibility to adjust benefits, premiums, and borrow against the policy, subject to the terms of your policy.
What happens if I outlive my term life insurance policy?
If you outlive your term life insurance policy, the coverage ends, and there is no payout. Since term life does not accumulate cash value, you don't receive money back at the end of the term. However, some policies offer a renewal option or conversion to a permanent policy without needing a medical exam, providing continued coverage options.
The bottom line
If you’re in your 40s and don’t have life insurance, there’s no need to panic. There are plenty of options available to you. Whether you’re single or using your income to support your family, you can find a life insurance policy right for you.
It all comes down to what you’re looking for from your policy. You’ll need to consider your current expenses, your family, and future goals. Life insurance is all about planning for the future, so don’t rush to decide.
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Writer
Ashley Hart is a lead copywriter and digital marketing expert covering finance, law, real estate, music, entertainment, health and wellness.
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