Our calculator provides an estimated life insurance coverage amount that can help replace your income and provide financial security for your family in the event of your passing.

The calculator considers current insurance coverage and your financial status to assist you in determining whether your existing coverage sufficiently safeguards your loved ones.

If your projected coverage falls short of your goal, the calculator recommends additional coverage to close the gap.

Your Calculator Inputs

To get started, we only require three fields:

1. Total Annual Income: What's your yearly salary? Include any bonuses and other recurring income.
2. Years Family Depending on Income: How many years will your family need income replacement after you pass away?
3. Existing Life Insurance Coverage: How much coverage do you have in current life insurance policies?

Advanced Inputs

Expanding the Advanced drop-down menu allows you to enter additional details for a more precise estimate. Providing more information enables you to personalize your results.

• Assets: How much have you saved and invested? Include bank accounts, mutual funds, stocks and bonds, IRAs, 401(k) accounts, college funds, emergency funds, etc.
• Debt: How much do you currently owe? Include mortgage balance, home equity loans, credit card debts, car loans, taxes, and any other debt your family would need to pay off.
• Final Expenses: What would be the approximate cost for your family to cover your funeral expenses? The average traditional funeral costs between $7,800 and $8,300 in the U.S.¹
• Children: How much will you need to cover the education, child care, medical, and daily living expenses of all your children? Include primary and higher education costs.

Understanding Your Results

Our Life Insurance Calculator estimates the additional coverage required (Life Insurance Coverage Needed) to provide for your beneficiaries for the number of years you selected.

Here are the steps to help you understand and act on the information provided by a life insurance calculator:

1. Review Your Coverage Amount

• Understand the figure: The primary output is the amount of coverage (or death benefit) recommended for you. This figure is calculated based on your financial obligations, income, existing assets, and future income needs (such as education costs for children or retirement savings for your spouse).
• Assess adequacy: Compare this figure with your current and future financial commitments. Ensure it covers significant debts (like your mortgage), everyday living expenses for dependents, and future financial goals.

2. Examine Assumptions

• Check inputs: Review the data you entered into the calculator. Minor errors can significantly affect the recommended coverage.

3. Consider Different Scenarios

• Adjust variables: Use the calculator to simulate different scenarios by adjusting the input variables. For instance, see how the recommended coverage changes if you increase your savings rate or if you plan for your children to attend more expensive colleges.
• Plan for contingencies: Consider the impact of unforeseen events, such as a severe illness resulting in medical costs or an economic downturn. Check if the recommended coverage still meets your needs in such scenarios.

4. Types of Life Insurance

• Understand policy features: Learn about the characteristics of the different policy types, such as whether they offer lifelong coverage or cash value accumulation.

5. Consult an Insurance Professional

• Seek advice: While life insurance calculators provide a good starting point, consulting with a financial advisor or insurance specialist can provide deeper insights. They can help refine your coverage based on detailed financial planning and personal circumstances.
• Review periodically: Life insurance needs change over time. Make it a point to review your policy and coverage as your financial situation evolves, or at least every few years.

6. Decision Making

• Prioritize needs: Based on the calculator's output and your subsequent research, prioritize your coverage needs against your budget.
• Final selection: Choose the type of policy that offers the best coverage at a cost that fits your financial plan, ensuring it also aligns with your long-term financial goals.

By following these steps, you can interpret and utilize the results from our calculator effectively, ensuring you secure the right life insurance coverage level to protect your family's financial future.

Considerations To Keep In Mind

When estimating coverage with our life insurance calculator, there are several important considerations to keep in mind to ensure you get an accurate estimate that reflects your needs and financial situation.

1. Future Financial Goals: Think about future expenses that you want to cover, such as children's college costs, retirement savings for your spouse, or any other significant financial goals.
2. Inflation: Consider the effect of the inflation rate on future financial needs. The value of money decreases over time, so what seems like a substantial amount now might not suffice in the future.
3. Type of Policy and Term: Decide if you need term life insurance, which covers you for a specific period, or whole life insurance, which offers lifelong coverage and a cash value component. The choice will impact your coverage amount and life insurance rates.
4. Health and Age: Your health and age significantly affect your insurance premiums and coverage options. The younger and healthier you are when you buy life insurance, the more affordable your premiums will likely be.
5. Spouse and Dependents: Consider whether your spouse works, how much they earn, and how many dependents rely on your income. This will influence the amount of coverage you need to ensure their lifestyle is maintained.
6. Tax Implications: Understand the tax implications of your life insurance policy. While the death benefit is usually tax-free, other aspects, like cash value withdrawals from a whole-life policy, may have tax consequences.
7. Review and Update Regularly: Life circumstances change (e.g., marriage, birth of a child, new mortgage), so it's crucial to review and update your coverage accordingly to ensure it continues to meet your needs.

By keeping these considerations in mind, you can more accurately estimate the right level of life insurance and coverage type to protect your family's financial future.

Benefits of Using a Life Insurance Calculator

Our life insurance calculator helps you make informed decisions about your financial protection:

• Clarity and Guidance: Provides an estimate of the coverage you may need based on your unique circumstances and goals.
• Personalized Results: Considers your specific financial situation, including income, debts, dependents, and future expenses. This customized approach ensures you don't end up over- or underinsured.
• Time-Saving: Manually computing your life insurance needs can be complex and time-consuming. Our calculator streamlines the process, providing quick and reliable estimates.
• Financial Awareness: Increases your awareness of your financial obligations and how life insurance can help secure your family's future. It highlights the importance of this protection in your financial plan.

Mistakes To Avoid When Calculating Your Life Insurance Needs

Even with careful consideration, there are some common pitfalls to avoid when it comes to life insurance. Knowing these can help you be better prepared and more confident about your decision.

Underestimating or Overestimating Your Needs

This is a fine line that may be tricky to walk. Ideally, you want to avoid both underestimating and overestimating your needs. On the one hand, underestimating may put your family at financial risk if something happens to you. On the other hand, overestimating may mean paying excess premiums for protection you don't need — funds that could be used elsewhere in your budget.

Some of the calculation methods previously mentioned, along with working with a financial professional, can help you strike the right balance.

Overlooking Inflation & Changes In Living Costs

The cost of living rarely stays the same and tends to rise over time due to inflation. These are factors to consider when determining your life insurance needs.

Predicting 10 or 20 years into the future is challenging. Still, adding an inflation buffer to your life insurance calculations helps ensure your beneficiaries' purchasing power will to some degree be preserved.

Forgetting About Debts & Future Obligations

Unfortunately, your debts don't disappear after you die. Those debts may hamper your loved ones' ability to feel financially secure. As such, including them in all your coverage considerations is important.

Factor in significant debts, such as your mortgage, student loans and car loans, to your coverage calculations. You may also want to plan ahead by allowing for potential expenses, such as your children's education or financial assistance for other loved ones, such as aging parents or siblings, who may require support in the future.

Relying Solely on Employer-Provided Life Insurance

Employer-sponsored life insurance is a great perk. It can provide some coverage, often for free. However, there are a few factors to consider about this benefit and how it may shape your other decisions around life insurance.

In many cases, employer-provided coverage may not be enough for your needs. These policies often cover one to three times your salary, which may not meet your family's full financial needs. Additionally, coverage may be tied to your employment, meaning you will lose the policy and be without coverage if you leave your job. That being the case, you may want to consider supplemental coverage.

This also helps answer the question, "Can you have multiple life insurance policies?" Yes, you can. Many people have an employer-sponsored policy through work and an additional, more substantial policy to help provide for the bulk of their beneficiary's financial needs.

Choosing Coverage Based Only on Premium Cost

Cost is always a factor with life insurance. Term life insurance policies tend to be more affordable, especially if you secure coverage when you're younger and healthier. Because permanent life insurance lasts your entire life, it tends to be more expensive. However, the policy's bottom-line cost may not be the best deciding factor. Making your decision is also about value and having the right coverage for your needs.

What if you can't afford the recommended life insurance amount? It's understandable to feel stressed if the ideal coverage is financially out of reach. If this is the case, there are a few strategies you can consider:

• Prioritize protection for your most urgent needs, such as covering your mortgage or ensuring your children have some income replacement during their younger years.
• Explore term vs. permanent coverage to see if one better fits your budget and offers the protection you need at a cost that works.
• Consider riders, which are add-ons to policies that can help customize coverage for specific needs.
• Review your budget and see if you can cut costs in discretionary spending or improve your income to help cover your needs.

If the ideal amount is a long way off, realize that even a small policy is often better than none. It provides some protection for your loved ones. Plus, it's almost always possible to add more coverage if your income increases over time.

Not Reassessing Regularly

Regularly reassess your coverage. Life is full of changes, planned and unplanned. Marriage, new additions to your family, divorce or significant income changes may all be reasons to review your current policy and make changes, if needed.

Consider setting time aside yearly to review your policy coverage and any financial changes. Then act promptly to update your life insurance as needed.

Sources

1. 2023 NFDA General Price List Study Shows Inflation Increasing Faster than the Cost of a Funeral. https://nfda.org/news/media-center/nfda-news-releases/id/8134/2023-nfda-general-price-list-study-shows-inflation-increasing-faster-than-the-cost-of-a-funeral.