Find the shortfall between needs and protection. Model income replacement, debts, and future lump expenses. Download results, view charts, and close the gap fast.
r = (1 + discount) / (1 + inflation) − 1need_base = income × replacement_percentneed_net = max(0, need_base − offsets)need_gross = need_net / (1 − tax)need_gross × (1 − stepdown)PV = payment × (1 − (1 + r)^(-years)) / rresources = raw × (1 − haircut)max(0, total_needs − resources)coverage_needed − current_insurancePMT = gap × i / ((1 + i)^n − 1)These are planning estimates and depend on your assumptions.
| Scenario | Needs | Resources | Insurance | Gap |
|---|---|---|---|---|
| Conservative | $560,000 | $60,000 | $150,000 | $350,000 |
| Moderate | $460,000 | $95,000 | $200,000 | $165,000 |
| Optimistic | $390,000 | $135,000 | $250,000 | $5,000 |
A coverage gap is the difference between required protection and available financial support. It often appears after major life changes such as a new mortgage, a child’s education plan, or a career shift. This calculator turns those needs into a single, comparable number and shows whether current coverage and assets are sufficient.
Income replacement begins with annual income multiplied by a replacement percentage. Optional offsets, including spouse income and public or survivor benefits, reduce the annual need because they substitute for coverage. If you treat the target as after‑tax spending, the calculator grosses the need up using the tax rate so the remaining household cash flow stays intact.
To compare future income support with today’s money, the tool applies a real discount rate derived from your discount and inflation assumptions. The result is a present value of the income stream, not a simple sum of years. A step‑down option lowers the annual need after a selected year to reflect a future reduction in expenses, such as fewer dependents or completed loan payments.
Beyond income, the estimate adds one‑time goals and obligations: debts, mortgage payoff, final expenses, education funding, and any other lump needs. Two liquidity buffers improve realism. Emergency months provide a cash reserve for immediate bills, while claim‑delay months add extra runway if benefits or payouts are slow to arrive. An optional legacy goal increases the final requirement if wealth transfer is important.
Resources reduce the coverage requirement before comparing it with existing insurance. Savings, employer benefits, and other assets are included, and an asset haircut can be applied to reflect market volatility or limited access. The charts help validate drivers: the waterfall shows which need components dominate, and the donut shows funding composition. If a shortfall exists, the savings plan estimates the monthly contribution required to accumulate the gap over your chosen horizon and return rate. Re-run scenarios with conservative rates, higher expenses, or lower resources to stress-test outcomes and document assumptions for periodic reviews with your advisor.
1) What does a coverage gap represent?
It is the remaining coverage needed after subtracting usable assets from total needs, compared against your current insurance. A positive value indicates a shortfall; a zero or negative value indicates you are covered under the selected assumptions.
2) How should I choose discount and inflation rates?
Use an inflation estimate for future living costs and a discount rate that reflects expected long‑term investment returns for funds set aside. The calculator derives a real rate from both, so extreme values can materially change present value results.
3) Why would I apply a liquidity haircut to assets?
Some assets may not be available at the moment of need, or their value may fall during market stress. A haircut conservatively reduces usable resources to reflect volatility, taxes, penalties, or timing constraints.
4) What is the step-down option used for?
Step‑down reduces the annual income need after a chosen year. It fits situations where expenses fall later, such as children becoming independent, debts decreasing, or a spouse returning to work.
5) How should I interpret the monthly gap-closing plan?
The monthly figure estimates the contribution required to accumulate the current shortfall over your selected years at the assumed return. It is not a premium quote; it is a savings target to improve resilience.
6) Can I use this output as a final coverage decision?
Use it as a planning estimate and revisit it periodically. Validate inputs, confirm policy details, and consider taxes and legal constraints. For complex situations, review results with a qualified professional.
Important Note: All the Calculators listed in this site are for educational purpose only and we do not guarentee the accuracy of results. Please do consult with other sources as well.