Permanent life insurance provides a death benefit to your beneficiaries, but it also often includes a cash value component that grows over time on a tax-deferred basis. Calculating your insurance needs is crucial to ensure your loved ones are financially protected and that your policy's death benefit is adequate for their long-term security.
This calculator estimates the amount of life insurance needed by considering several key factors:
Your Current Annual Income: This is the base for calculating how much income your dependents would lose if you were no longer around to provide for them.
Number of Years Income Needs to Be Covered: This represents the period your beneficiaries will require financial support, such as until children are independent or a spouse is able to be self-sufficient.
Existing Savings & Investments: Any assets your beneficiaries could immediately access reduce the amount of life insurance needed.
Total Other Debts: This includes mortgages, car loans, credit card debt, and any other financial obligations that would need to be settled.
Estimated Funeral & Final Expenses: These are immediate costs that your beneficiaries will face, often including medical bills, funeral services, and estate settlement costs.
The Calculation
The formula used by this calculator is a simplified approach to determine a necessary death benefit:
Insurance Needs = (Annual Income * Years to Cover) + Other Debts + Funeral Costs – Existing Savings
Let's break this down:
Income Replacement:Annual Income * Years to Cover estimates the total income your beneficiaries would need if your income stream ceased.
Debt Coverage:Other Debts ensures that outstanding financial obligations are covered, preventing a burden on your estate or family.
Immediate Expenses:Funeral Costs accounts for the immediate expenses that arise after passing.
Deduction:Existing Savings are subtracted because these funds can offset the total amount of insurance required.
Why Permanent Life Insurance?
Permanent life insurance, such as whole life or universal life, offers lifelong coverage as long as premiums are paid. It also builds cash value over time, which can be borrowed against or withdrawn (though this may reduce the death benefit and incur taxes). It's often chosen for long-term financial planning, estate planning, or covering final expenses.
Disclaimer: This calculator provides an ESTIMATE. It is not a substitute for professional financial advice. Your actual insurance needs may vary. Consult with a qualified financial advisor or insurance agent to determine the most suitable policy for your unique circumstances.
function calculateInsuranceNeeds() {
var annualIncome = parseFloat(document.getElementById("annualIncome").value);
var yearsToCover = parseFloat(document.getElementById("yearsToCover").value);
var existingSavings = parseFloat(document.getElementById("existingSavings").value);
var otherDebts = parseFloat(document.getElementById("otherDebts").value);
var funeralCosts = parseFloat(document.getElementById("funeralCosts").value);
var resultElement = document.getElementById("result");
resultElement.innerHTML = ""; // Clear previous results
// Input validation
if (isNaN(annualIncome) || annualIncome < 0 ||
isNaN(yearsToCover) || yearsToCover <= 0 ||
isNaN(existingSavings) || existingSavings < 0 ||
isNaN(otherDebts) || otherDebts < 0 ||
isNaN(funeralCosts) || funeralCosts < 0) {
resultElement.innerHTML = "Please enter valid positive numbers for all fields.";
return;
}
var incomeReplacement = annualIncome * yearsToCover;
var totalNeeds = incomeReplacement + otherDebts + funeralCosts;
var insuranceAmount = totalNeeds – existingSavings;
// Ensure the insurance amount is not negative
if (insuranceAmount < 0) {
insuranceAmount = 0;
}
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 0,
maximumFractionDigits: 0
});
resultElement.innerHTML = "Estimated Permanent Life Insurance Needs: " + formatter.format(insuranceAmount) + "";
}