Life Insurance Needs Calculator
Estimate the coverage required to protect your family's financial future.
Your Insurance Summary
Income Replacement:
$0
Debt Liquidation:
$0
Education & Final Costs:
$0
Subtotal Needs:
$0
Less Current Assets:
-$0
Total Suggested Coverage:
$0
$0
Understanding Your Life Insurance Requirements
Determining how much life insurance you need is one of the most critical financial decisions you will make. It isn't just about a "lump sum"; it's about replacing your economic value to those who depend on you. This calculator uses the DIME method (Debt, Income, Mortgage, Education) to provide an accurate estimate.
How We Calculate Your Needs
The calculation follows a logical progression of financial obligations:
- Income Replacement: This is usually the largest component. We multiply your annual income by the number of years your family would need that support (often until your youngest child graduates or your spouse reaches retirement).
- Debt Liquidation: Your life insurance should be enough to pay off all outstanding debts, including mortgages, car loans, and credit card balances, so your family can stay in their home debt-free.
- Education Fund: If you have children, you may want to include the projected cost of college tuition and board.
- Final Expenses: This covers immediate costs like funeral services, which can range from $7,000 to $15,000.
- Asset Deduction: We subtract any liquid assets you already have, such as current savings, brokerage accounts, or existing employer-provided life insurance.
Example Calculation
Imagine Sarah, who earns $75,000 a year. She wants to provide for her family for 15 years. She has a $300,000 mortgage and wants to set aside $100,000 for her child's education. She has $50,000 in savings.
- Income Replacement: $75,000 x 15 = $1,125,000
- Mortgage/Debt: $300,000
- Education: $100,000
- Funeral: $15,000
- Total Need: $1,540,000
- Less Assets: $50,000
- Net Coverage Needed: $1,490,000
Why Term Life Insurance is Often Preferred
For most families, Term Life insurance is the most cost-effective way to get the high amount of coverage required during high-need years (while kids are young and debt is high). This calculator helps you determine the face value of a policy you should look for when shopping for quotes.