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June 10, 2020

How Much Life Insurance Do You Need?

Once you understand why you need a life insurance policy, you're likely to be left with two big questions: how much coverage do I need, and how much will it cost?

The cost of your life insurance policy can be affected by a variety of factors. First, the type of policy you choose is an important part of the equation, as permanent plans tend to be more expensive than term policies due to the possible addition of cash value. You can read more about the differences between term vs. perm here.
  Beyond that, other characteristics such as your health and lifestyle can impact cost, including:
  • Age
  • Gender
  • Marital status
  • Tobacco usage
  • If your lifestyle includes risky hobbies, like sky diving, for example
  • Personal and family medical history
  • Results from a medical exam that could include information such as weight, blood pressure and cholesterol levels
Health may play the biggest role of all, which is why some providers require a medical exam. Because healthier people face a lower risk of dying prematurely, insurance companies can charge them less for life insurance. So, typically the younger and healthier you are, the less you will pay for your policy.


Of course, the amount of coverage you need also helps determine the cost of your policy and premium payments. Your current life stage can influence your coverage calculations, such as whether you have any debts or dependents to consider. One helpful way to frame this is the D.I.M.E. formula. D.I.M.E. stands for debt, income, mortgage and education, emphasizing four key areas you should think about when putting together your policy. It breaks down like this:

  • Debt and final expenses - add up any outstanding debt besides your mortgage, like student loans, credit cards or unpaid medical bills, plus an estimate of funeral costs
  • Income - think about the amount of income replacement your family would need to maintain their standard of living by taking your annual income and multiplying it by the number of years they would need that support
  • Mortgage - calculate the remaining amount necessary to pay off your home loan
  • Education - if you have kids, you'll want to consider the cost of future tuition and how much you'd like to have saved for those expenses

For an even more comprehensive look at what your policy needs might be, you can plug your information into our life insurance coverage calculator.


The CommunityAmerica Insurance Agency is here to help you make the decisions that will give you peace of mind for both right now and the future. We offer flexible life insurance options, and our advisors are ready to walk you through the process of building the perfect policy for your family. Give them a call at 913.905.7795 or request a quote online to get started:


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About the Author
Meet Kat Hnatyshyn
Kat Hnatyshyn

Indirect Lending Program Director

Kat Hnatyshyn currently serves as the Indirect Lending Program Director at CommunityAmerica Credit Union, overseeing the program and our partnership with approximately 160 auto and Harley Davidson dealerships throughout the Kansas City metro. This partnership gives CommunityAmerica members a smooth auto buying experience by allowing them to finance their vehicle through us, directly from the dealership.