How Much Life Insurance Can I Buy?

In insurance lingo, brokers refer to this question as part of the financial underwriting process. The amount of coverage you can buy must reflect your economic value. There are a few ways to justify the requested face amount by calculating your assets and liabilities.

However, most companies follow this simple formula: the younger an applicant is, the more coverage he needs because the children are still young, the mortgage balance is still outstanding, so passing away in these critical times could devastate the beneficiaries.

Nevertheless, once the applicant is older and has fewer liabilities to protect (children are older, the mortgage is paid off), the less coverage he will qualify for.

Here is a basic formula to estimate the maximum coverage you can receive:

• Up to age 40: You can buy 35 times your yearly income.
• 41–50: You can buy 25 times your yearly income.
• 51–60: You can buy 20 times your yearly income.
• 61–70: You can buy 10 times your yearly income.
• 71–80: You can buy 5 times your yearly income.