Term Insurance Calculator

Term Insurance Coverage Calculator

Subtract existing savings or insurance to find the gap.

Recommended Term Insurance Cover

function calculateInsurance() { var income = parseFloat(document.getElementById('annualIncome').value) || 0; var years = parseFloat(document.getElementById('yearsNeeded').value) || 0; var debts = parseFloat(document.getElementById('totalDebts').value) || 0; var goals = parseFloat(document.getElementById('futureGoals').value) || 0; var assets = parseFloat(document.getElementById('currentAssets').value) || 0; if (income <= 0 && debts <= 0 && goals <= 0) { alert("Please enter your income or liabilities to calculate coverage."); return; } var grossNeed = (income * years) + debts + goals; var finalCoverage = grossNeed – assets; if (finalCoverage < 0) { finalCoverage = 0; } var resultArea = document.getElementById('resultArea'); var coverageResult = document.getElementById('coverageResult'); var summaryText = document.getElementById('summaryText'); resultArea.style.display = 'block'; coverageResult.innerHTML = finalCoverage.toLocaleString(undefined, { minimumFractionDigits: 0, maximumFractionDigits: 0 }); summaryText.innerHTML = "Based on your current annual income and " + years + " years of financial protection, plus your outstanding liabilities and future goals, you should aim for a total life cover of approximately " + finalCoverage.toLocaleString() + ". This ensures your family maintains their lifestyle and debt-free status in your absence."; }

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How Much Term Insurance Do You Actually Need?

Choosing the right sum assured for your term insurance is the most critical decision in financial planning. A policy that is too small leaves your family vulnerable, while over-insuring leads to unnecessarily high premiums. A term insurance calculator helps you identify the exact "protection gap" in your financial life.

The DIME Formula for Insurance Calculation

Many financial experts recommend the DIME method to calculate life insurance requirements:

• Debt: Total up all your outstanding loans including mortgages, car loans, and credit cards.
• Income: Calculate how many years your family will need your salary. A common rule is 10 to 15 years of your current annual income.
• Mortgage: If not included in debt, ensure the primary residence is fully covered.
• Education: Estimate the future costs for your children's higher education and other life milestones.

Example Scenario

Consider an individual earning $75,000 per year. They have a mortgage of $200,000 and two children whose education is estimated to cost $100,000 total. They have $50,000 in existing savings.

Step 1: Income Replacement (15 years) = $1,125,000
Step 2: Add Liabilities = $200,000
Step 3: Add Future Goals = $100,000
Step 4: Subtract Savings = -$50,000
Total Recommended Cover: $1,375,000

Key Factors Influencing Your Coverage

1. Current Age: Younger individuals generally need more coverage because they have more years of expected income to replace.
2. Lifestyle Inflation: As your lifestyle improves, your insurance coverage should ideally be reviewed every 3-5 years.
3. Number of Dependents: A larger family with non-working members requires a higher sum assured.
4. Inflation: Remember that $1 million today will not have the same purchasing power in 20 years. Always round up your calculation.

Frequently Asked Questions

Is 10 times my annual salary enough?

While the "10x rule" is a popular starting point, it often fails to account for significant debts or specific future goals like college tuition. Our calculator uses a more comprehensive "needs-based" approach.

Should I include my partner's income?

If your household depends on two incomes, both partners should ideally have term insurance. You should calculate the coverage based on the specific financial contribution each person brings to the home.