| Scenario | Living (annual) | Other income | Years | Debts | Existing + savings | Suggested coverage |
|---|---|---|---|---|---|---|
| Base | 60,000 | 12,000 | 20 | 90,000 | 175,000 | ≈ 420,000 |
| Conservative | 60,000 | 12,000 | 25 | 110,000 | 175,000 | ≈ 540,000 |
| Shorter support | 60,000 | 12,000 | 12 | 70,000 | 175,000 | ≈ 265,000 |
The calculator estimates total beneficiary need as: Immediate Needs + Present Value of Income Support.
- Income gap (year 1) = max(0, annual living expenses − annual other income).
- Present value of income support uses a growing annuity: PV = P × (1 − ((1+g)/(1+r))n) / (r − g), where P is year‑one gap, g is inflation, r is net return, and n is years.
- Net return = expected return − tax drag/fees.
- Immediate needs = debts + final expenses + education + emergency + medical buffer.
- Recommended additional coverage = max(0, total need − (existing coverage + savings + employer benefits)).
- Enter annual living expenses your beneficiaries must cover.
- Add reliable annual income they would still receive.
- Set years of support and conservative inflation and return.
- Enter debts and one‑time goals like education funding.
- Offset with existing coverage, savings, and employer benefits.
- Allocate the recommended coverage across beneficiaries by share.
- Download CSV or PDF to discuss with your advisor.
What the estimate measures
This calculator builds a beneficiary-focused coverage target from two layers: ongoing income support and one-time obligations. Income support starts with the first‑year gap between living expenses and reliable survivor income. One-time items include debts, final expenses, education goals, and cash buffers.
Key drivers that change the coverage gap
Small assumption changes can move results materially. For many households, a 1% change in net return can shift the present value by roughly 5%–12% over 20 years, depending on inflation. Extending support from 15 to 25 years often increases the income-support present value by 35%–70%. Debt payoff decisions also matter because they hit the estimate immediately.
Interpreting the income-support present value
The income component is modeled as a growing payment stream, rising with inflation, discounted by net return after taxes and fees. When net return is close to inflation, the discounted value rises sharply, because future payments are not being “eroded” by discounting. If you want conservative planning, lower net return or raise inflation to see a higher coverage need. If you expect a step-down in expenses later, shorten the support years rather than forcing a low expense number today.
Allocating proceeds across beneficiaries
Coverage needs are rarely identical across beneficiaries. Use shares to match goals such as mortgage continuity, childcare, elder care, or education funding. If shares do not total 100%, the tool still allocates proportionally, which helps compare scenarios. Document notes beside each beneficiary to clarify why an allocation exists. Consider naming a contingent beneficiary so proceeds transfer smoothly if a primary beneficiary cannot receive them.
Stress-testing and documenting the plan
Run at least three scenarios: base, conservative, and short-term support. Consider whether savings should be reserved for emergencies rather than counted fully as offsets. Export the CSV and PDF to keep a planning record, then review annually or after major changes like a new child, a home purchase, or a job shift. Store the report with policy details and keep beneficiary information consistent across accounts.
1) What should I include as other income?
Add predictable amounts beneficiaries will still receive, such as survivor benefits, a spouse’s ongoing earnings, rental income, or pensions. Exclude uncertain bonuses and one‑time gifts so the gap estimate stays conservative.
2) Why does inflation matter in the income calculation?
Living costs usually rise over time. The model grows the income gap by your inflation assumption, then discounts future gaps by net return. Higher inflation increases the present value and typically raises the coverage need.
3) What is tax drag or fees?
It is the annual reduction to investment return from taxes, advisory fees, and fund expenses. Using a tax-drag estimate helps avoid overstating how long proceeds can support beneficiaries.
4) What if beneficiary shares don’t equal 100%?
The tool allocates proportionally using your total share number instead of forcing 100%. This keeps comparisons consistent across scenarios. If you want exact percentages, adjust shares until they total 100%.
5) How often should I update the inputs?
Review at least yearly and after major events: marriage, a new child, a home purchase, debt changes, or a new job. Updating keeps the coverage gap aligned with current expenses, income sources, and goals.
6) Does this replace professional planning?
No. It provides an educational estimate. Policy type, taxes, beneficiary rules, and your local regulations can change outcomes. Use the exported report to discuss options with a licensed advisor or financial professional.