Calculating Life Insurance Needs at Age 40

Life insurance provides beneficiaries with a lump-sum payout once the policyholder dies. But, unbeknownst to many, it replaces more than just lost income. After all, every 40-year-old should have some type of coverage, even if they aren’t working.

PHP Agency reviews that people approaching middle age often put off acquiring the imperative policy because they don’t know how to calculate the amount they need. Luckily, with a little bit of research and effort, it can really be quite easy.

Calculating Life Insurance Needs

The challenging part about calculating life insurance is that there is no “one size fits all” method. Financial planners tend to suggest methods aligned with their client’s family obligations, the standard of living they want to give their loved ones, and the amount of debt they have.

The most popular methods for working out how much life insurance a 40-year-old should purchase are as follows:

Final Expensive Coverage

Final expensive coverage is a small death benefit that helps the surviving family members cover the costs of funerals and burials or cremations.

On average, funerals cost between $6,971 and $7,848. However, this can quickly ramp up if relatives decide to host a wake, purchase flowers and other adornments for the coffin, and more. So, people opt to take out a life insurance policy that covers these exorbitant fees.

However, most term life providers won’t allow policies this small. So, wannabe policyholders will have to choose a permanent life coverage plan, like universal or whole life insurance.

Ten Times Yearly Salary

This is perhaps the easiest way to calculate how much life insurance to take out at age 40 — policyholders just multiply their yearly earnings by ten.

For single adults, this is a good benchmark rule to use.

For example, in California, a non-smoking, healthy 40-year-old female making $50,000 per year could get a 20-year policy with a death benefit of $500,000 for $30 a month.

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Ten Times Yearly Salary Plus $100,000 Per Child

Mortgages and other massive debts can consume a six-figure payout easily, making ten times yearly earnings smaller once expenses are considered.

So, some 40-year-olds with children multiply their incomes by ten and add $100,000 per child to the figure.


The Debt Income Mortgage Education method involves:

  • Finding the total value of debt, including outstanding mortgages
  • Adding the policyholder’s expected income until every child reaches 18
  • Adding children’s education costs.

The average 40-year-old has roughly $350,000 in mortgage debt without student loans, credit cards, and/or other personal loans, like car or home equity loans. With two children and a modest salary, many people decide to get a $1 million life insurance policy.

The Bottom Line: Everyone Should Consider Obtaining a Life Insurance Policy

Individuals should consider acquiring life insurance as soon as possible if they have others who depend on their income or non-financial work (e.g., cooking, cleaning, etc.) to survive. But it’s never too late to get coverage.

Everyone in their 40s should have a life insurance policy to financially protect their families upon their untimely death, ensuring they can cover debts and funeral costs, and still have some money left over.

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