Much Life Insurance Do I Need
the life insurance amount needed is almost always an estimate. You
should try to use reason to estimate how much life insurance you
should purchase rather than emotion. If you are reacting to the
amount of insurance as 'that's way too much', then you are using
emotion. Instead look at the need that the insurance is covering.
This can help prevent being underinsured or leaving your dependents
in financial difficulty.
The following calculator is based upon the following
- You are a breadwinner
attempting to maintain your dependents' standard of living upon
- You are maintaining
your current standard of living through your paycheck.
- Providing a replacement
paycheck upon your death will allow your dependents to maintain
their current standard of living (paying the mortgage, buying
groceries, saving for college, etc.).
- The calculator will
determine how much lump sum life insurance is needed to provide
this replacement paycheck.
Scroll down to view your results
- Income to be
Replaced: Enter your current paycheck.
- Percent of
Income Needed:Assuming that the full value of
the paycheck may not be needed, you may only need 80% of the current
paycheck to maintain your dependents standard of living. There
will be one less car, less clothing and food to purchase, etc.
- Interest Rate: Estimate a conservative interest
rate that will be applied to the insurance amount through the
years as the replacement paycheck is paid out.
- Inflation Rate: To better duplicate your paycheck
the calculator will use an inflation rate to increase the amount
of the replacement paycheck each year. As one would expect your
income to increase each year by roughly inflation this measure
helps prevent the assumption that your dependents will remain
on a fixed income.
- Number of Years
to Replace: How long you want to produce
the replacement paycheck. To properly duplicate your income stream
you can enter the number of years until you retire. Another common
assumption would be until any children are done schooling.