About this tool
Coverage needs, explained
Estimate how much life insurance cover your family would need if your income stopped. Add the income to replace, the years, debts, education and final expenses, take away savings and existing cover, and get an amount to start your search from. It is an estimate, not a quote.
How to use it
- 1Set the Yearly income to replace and the Years to cover, or start from a preset: Young family, Single, renting or Near retirement.
- 2Set the Debts to clear (mortgage, loans) and the Savings already in place.
- 3Under Family, set the Children, Education per child and Final expenses. Under Assumptions, add any Cover already in place and the Return on the payout, after inflation.
- 4Read the Cover to consider, the Rounded policy size, and the How it adds up table.
How it works
How the cover amount is estimated
The calculator uses a needs-based approach. The income part is the lump sum that, invested at the return you set after inflation, pays the yearly income for the years you choose. At 0% it is the income times the years.
It adds the debts you want cleared, the final expenses and the education cost of each child, then takes away your savings and any cover already in place, such as an employer policy. The result is the cover to consider, never below zero, and the rounded policy size is that amount rounded up to the next $50,000.
With the starting figures, $70,000 a year for 15 years at a 2% real return, $180,000 of debts, two children at $50,000 each, $15,000 of final expenses and $40,000 of savings, the income part is $899,448 and the cover to consider is $1,154,448, a policy of about $1,200,000.
Taxes on the payout, other income in the household and state benefits are not counted. If they apply, lower the income to replace.
Cover = Income × (1 − (1 + r)^−years) / r + Debts + Final expenses + Children × Education − Savings − Existing cover (minimum 0), with r = real return
When to use it
Ways people use it
Before asking for quotes
Arrive at a quote request with a cover amount and a term you have thought through, instead of a round number.
Reviewing existing cover
Enter your current policy as cover already in place after a move, a new child or a new mortgage, and see whether a gap remains.
Planning as a couple
Run one partner as scenario A and the other as scenario B, since each income and each set of responsibilities leads to a different amount. Copy link keeps both.
FAQ
Questions people ask
How much life insurance do I need?
A needs-based estimate adds the income your family would need over a number of years to the debts, education and final expenses you want covered, then subtracts the savings and cover already in place. That is the method this calculator uses.
How many years of income should life insurance replace?
Many people pick the number of years until their youngest child is financially independent, or until their mortgage is paid off. Choose the period during which others depend on your income.
Should life insurance cover the mortgage?
Clearing the mortgage is one of the most common reasons to take out cover, as it keeps the family home without the monthly payment. Include the outstanding balance in Debts to clear.
Does employer life cover count?
It helps, but it usually ends when you leave the job. Enter it as Cover already in place, and keep in mind it may not last as long as the years you want to cover.
Why is there a return on the payout?
A lump sum paid out today can be invested while your family draws on it, so it does not need to equal every future year of income. The default 2% is after inflation; set it to 0% for the most cautious figure.