The most common question we get from life insurance applicants is: “How much coverage do I need?” That’s a tricky question to answer since everyone’s specific situation is different. To help find the right answer for you and your loved ones, we built this life insurance calculator. Just provide your best estimates for the prompts and we’ll add it all up for you to give you a good starting point.
How to Use Our Needs Analysis Calculator
Our life insurance needs worksheet will walk you through seven questions designed to help you identify your loved ones’ current and future financial obligations. Here’s the easy three-step process to use our needs analysis tool.
Step 1: Let’s talk about immediate life insurance needs. If something happened to you, how much would your loved ones need to meet immediate obligations? This includes funeral expenses, final medical expenses, and repayment of short-term loans (credit cards, auto loans, etc.). It also includes the money needed to live real life on a daily basis – rent or mortgage, utilities, health insurance, etc. Our needs analysis tool will help you figure it all out.
Step 2: Now, let’s think further ahead and consider the long-term future expenses of your family. Additional long-term financial needs include replacing lost income to support your family until your children are grown, or paying for their college tuition.
Step 3: Use the life insurance needs calculator below to find out how the expenses you brainstormed in steps 1 and 2 add up. It’s all a part of being prepared for the future with a sound financial plan.
Life Insurance Calculator
Life Insurance Needs: In Detail
Let’s talk a bit more about each of our seven questions to help you get a better feel for what to enter in our needs analysis tool.
Final Expenses
We know – it’s uncomfortable to think about how you might pass away. But as a responsible spouse, parent, or grandparent, you need to think about the possibility of leaving medical bills behind. If you’re not sure what to include, use the average costs below in our life insurance needs worksheet above.
- Burial costs: The average funeral in the U.S. costs between $7,000 – $12,000. (Lincoln Heritage)
- Medical bills: If you pass away after a short illness, you may only owe the out-of-pocket costs specified by your health insurance. According to Healthcare.gov, the maximum out-of-pocket limit for a Marketplace health plan is $8,700. It’s almost certainly less than that if you’re insured through work.
Debt
Take a minute to think about any loans you’ve taken out. Would your loved ones be able to pay for these without your financial contributions? If not, add them to our needs analysis calculator above.
- Mortgage
- Home equity lines of credit
- Car loan
- Student loan
- Credit cards
Income
Take a look at your most recent paystub. What is your take-home pay for the month? Don’t worry about the pre-tax amount; you only need to calculate the amount you actually bring home. That’s the amount your loved ones will be without if anything were to happen to you. Enter that amount into our life insurance calculator.
If your income varies by quarter or season, refer to your previous year’s tax return to do this entry. If you’re a contractor, freelancer, or seasonal employee, take your total income from the year and divide it by 12 to get the average per-month amount you made last year. Enter this into our life insurance needs calculator.
Years
Think about how long you want to provide for your loved ones after you’re gone. The ideal scenario is providing for them until your kids are grown and your spouse can retire. But if that’s not financially feasible, how long might it be until they become financially stable? If your spouse will need to get a job, how long might that take? According to the Bureau of Labor Statistics, the average (mean) duration of unemployment in March 2022 was about 24.2 weeks (about 6 months). We set the default in our life insurance needs worksheet to 1 year, giving your family time to grieve and adjust before making dramatic changes like moving, seeking new jobs, etc.
Kids
This entry in our needs analysis tool is pretty straightforward – no explanation needed.
College
College costs vary widely, which makes it hard to estimate. But for the purposes of our needs analysis calculator, let’s throw out some averages. (Source: EducationData.org, 2022) Each of the figures below includes tuition, books, supplies and living expenses.
- 4-year in state college: $25,487
- 4-year out-of-state college: $43, 161
- 2-year in-state college: $15,748
- 4-year private college: $53,217
- 2-year private college: $34,019
Assets
Now, think about how much money your family would inherit from assets you own. This includes your savings account, investments, 401(k), IRA, and existing life insurance policies. If you own assets they could easily sell, such as a vacation home or “toys” like boats and RVs, it’s up to you whether you want to include their value here. You might prefer your family keep those assets for later, or you might be confident they could sell them and use the money for living expenses and college. It’s all up to you. Enter the grand total into our needs analysis tool.
Other Considerations for Life Insurance Needs
Of course, these expenses aren’t all you might want to consider when calculating your life insurance needs. If you own a business, for example, there are entirely different policy types we can help you use to create a business succession plan. Here are a few scenarios where there’s more to consider. These don’t happen often, so they’re not included in our needs analysis calculator.
- Business Owners. Do you want to leave a death benefit to a business partner so they can buy out your share of the business from your heirs? Let’s talk.
- Life insurance trusts. Do you have a special needs child? We can help you set up a trust so that their needs will always be taken care of.
- Charitable donations. Do you want some or all of your death benefit to go to a favorite charity? We can help make that happen.
If any of these apply to you, call us or email us. We’d be happy to go through some advanced planning options with you to make sure your policies accomplish everything you want them to. You can still use our life insurance calculator to estimate your basic policy needs, and we’ll help figure out the rest.
Want a real person to help you figure all this out?
Give us a call at (800) 521-7873. Or fill out the form below, tell us a little bit about your needs, and we’ll be in touch as soon as possible.