The purpose of life insurance is to replace your income should you die.
It ensures that your family will be able to continue living
as it does now.
To determine how much life insurance you need, you must determine how
much money your family will need in your absence over the course of
The following calculator helps you to determine the total amount of
life insurance that you will need. You should rerun this calculation
each time you have a child or your life changes significantly.
If the Total Life Insurance figure is negative, then you do not need additional life insurance. Otherwise
purchase the amount of insurance indicated.
This calculator makes several assumptions and it will be helpful if you understand them:
It is assumed that all life insurance money will be deposited in ultra-safe investments such as CDs should you die. This is generally the case. It is assumed
that CD rates of return, after taking taxes and inflation into account, are zero.
Your current assets such as retirement accounts, home equity, etc. are not considered in order to simplify the calculation. A financial planner or estate
lawyer would be a good
person to talk to if you have significant assets.
It is assumed that your spouse has no outside retirement savings, will retire at
age 65 and will live to age 95. During retirement, your spouse's living expenses are
assumed to be 80% of the expenses entered in the Living Expenses field.
"Spousal income" and "Other income" are assumed to end at age 65.