How to use the life insurance needs calculator
- Enter the annual income your family relies on, the years of support they would need and the share of income to replace.
- Add your mortgage, other debts, the number of children and a college fund for each, and final expenses.
- Subtract the savings your family could use and any existing life insurance, such as coverage through work.
- Read the estimated additional coverage and the breakdown of what the money would cover.
Formula
Income replacement = annual income x share replaced x years
Total needs = income replacement + mortgage + other debts + children x college fund + final expenses
Coverage gap = total needs - savings - existing coverage
A negative gap is shown as $0.00. Future income is not discounted and prices are not adjusted for inflation.
Worked example
A parent earning $75,000 wants 70% replaced for 10 years: $75,000 x 0.70 x 10 = $525,000.
Add a $250,000 mortgage, $15,000 of other debts, two children at $80,000 each ($160,000) and $15,000 of final expenses for total needs of $965,000. With $60,000 in savings and $100,000 of existing coverage, the gap is $805,000.
An estimate, not advice
This is an example based estimate, not insurance or financial advice. It uses simple arithmetic so you can see which needs drive the total. A licensed professional can build a fuller plan that accounts for taxes, inflation, a spouse's income and the specific policies available to you.
Why only part of your income
Your family would not need to replace the share of your pay that went to your own food, commuting and taxes on your earnings. The 70% default is only an example, and you can choose a share below or above it. Raise it if your family depends on all of it, and lower it if another adult earns well.
What this leaves out
Social Security survivor benefits, employer benefits, a spouse's income, child care costs and investment growth on a payout are not included. Compare the result with your net worth, your emergency fund and your remaining mortgage to judge what is already covered.
Assumptions and limits
- Every amount, including the years of support and the share of income replaced, is an example or an input you control.
- Income is not discounted to present value and no inflation or investment return is applied.
- Existing group coverage is counted only if you enter it, and may end if you leave your job.
- Taxes on any payout or on income, policy prices and eligibility are not modeled.
Frequently asked questions
How much life insurance do I need?
It depends on who relies on your income and what debts and goals would remain. This tool adds those up so you can see a range, but it cannot say what is right for your situation.
What is the 10 times income rule?
It is a rough shortcut some people use. This tool shows your total needs as a multiple of income so you can compare the shortcut with your own numbers.
Do I count my spouse's income?
This estimate does not. If your spouse earns enough to cover part of the household costs, you can lower the share of income replaced or the years of support to reflect that.
Should the mortgage be included?
Including it lets the family stay in the home without payments. If you prefer your family to have the option to sell, you could leave it out and rely on the home value instead.