Determining your coverage need

Once you understand the different types of insurance, it's time to figure out how much coverage to get.

To buy or learn more

First, understand how the type of insurance you choose depends on your coverage needs

There are 2 types of life insurance (term and permanent) as well as several subcategories. If your insurance need is for your lifetime, then permanent insurance, such as universal life insurance may be an appropriate solution. If your insurance need is primarily for a specific period of time, such as your working years, then term life insurance may be right for you. The most important part to know in terms of coverage needs is the difference between term and permanent life insurance.

Term life insurance:

  • Covers you for an amount of time you choose
  • Pays your beneficiaries a predetermined amount of money
  • Can be helpful for the loss of income

Permanent life insurance (whole and universal):

  • Generally covers you for your entire life
  • Pays your beneficiaries based on the type of policy you choose
  • Can be helpful for loss of income or transferring wealth to your heirs
open-book_icon Read more for an in-depth look at the differences between term and permanent life insurance.

Next, calculate how much coverage you'd like

The amount of coverage you get should reflect how much money you'd like your beneficiaries to receive in the event something happens to you.

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First, calculate your family's day-to-day needs—the entire amount of money it takes to run your household each month. One simple guideline is to aim for 5 to 10 times your annual salary and bonus. info-i-outline

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Next, plan for larger expenses such as college tuition, paying off student loans, a mortgage, other debts, running a business, or potential medical issues. info-i-outline

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If you have a spouse/partner, it's also important to have coverage for both people, no matter how much each person earns. You might need to cover costs such as additional caretaking of children or time off to settle the estate. info-i-outline


Finally, review your overall financial plan

It is also recommended that you review your life insurance coverage during the routine update of your overall financial plan.


When buying life insurance, there's no substitute for a thorough analysis of your personal situation. Fidelity can help you determine an adequate level of life insurance protection.


If you've decided on term coverage to replace your potential income, you can use our Term Insurance Quote Tool* to determine an approximate coverage amount and get a quote.

Next steps

Term life insurance
Learn about term coverage offered by Fidelity.


Universal life insurance
Learn about universal life insurance offered through Fidelity.