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Life Insurance Coverage Calculator

Estimated Insurance Need

function calculateInsurance() { var annualIncome = parseFloat(document.getElementById('annualIncome').value) || 0; var years = parseFloat(document.getElementById('yearsToReplace').value) || 0; var debt = parseFloat(document.getElementById('mortgageBalance').value) || 0; var education = parseFloat(document.getElementById('educationCost').value) || 0; var funeral = parseFloat(document.getElementById('funeralExpenses').value) || 0; var assets = parseFloat(document.getElementById('existingAssets').value) || 0; var incomeReplacement = annualIncome * years; var totalObligations = incomeReplacement + debt + education + funeral; var netNeed = totalObligations – assets; if (netNeed < 0) netNeed = 0; var resultBox = document.getElementById('results-box'); var resultDisplay = document.getElementById('final-result'); var breakdownDisplay = document.getElementById('breakdown-text'); resultDisplay.innerHTML = "$" + netNeed.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0}); breakdownDisplay.innerHTML = "Total Obligations: $" + totalObligations.toLocaleString() + " minus Current Assets: $" + assets.toLocaleString(); resultBox.style.display = 'block'; resultBox.scrollIntoView({ behavior: 'smooth', block: 'nearest' }); }

How Much Life Insurance Do You Need?

Calculating the right amount of life insurance is one of the most critical financial decisions you will make for your family's future. It ensures that in the event of your passing, your loved ones can maintain their standard of living, pay off the mortgage, and fund future goals like a college education.

The DIME Method Explained

A common strategy used by financial planners is the DIME formula, which stands for:

  • Debt: Sum of all your debts except your mortgage (credit cards, car loans).
  • Income: How many years your family will need your salary replaced.
  • Mortgage: The remaining balance on your home loan.
  • Education: The estimated cost of sending your children to college.

Key Factors to Consider

When using our calculator, consider these nuances to get the most accurate estimate:

  • Inflation: Remember that $50,000 today will not have the same purchasing power in 20 years. Many experts suggest adding a small buffer (3-5%) to your income replacement figures.
  • Stay-at-Home Parents: Even if a spouse doesn't earn a traditional salary, their contribution (childcare, household management) would cost a significant amount to replace.
  • Liquid Assets: Only subtract assets that are easily accessible. Retirement accounts like a 401(k) may be subject to taxes and should be calculated at their "after-tax" value.

Example Calculation

Let's look at a typical scenario for a 35-year-old professional:

Income: $75,000 x 10 years = $750,000

Mortgage: $300,000

Education: $100,000 (2 children)

Funeral: $15,000

Existing Savings: -$50,000

Total Coverage Needed: $1,115,000

Disclaimer: This calculator provides an estimate for educational purposes only. It is recommended to consult with a licensed financial advisor or insurance agent to determine your exact insurance requirements based on your specific legal and financial situation.

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