Life Insurance Budgeting Tool Calculator

1. Enter your household income, expenses, debts, and major goals.
2. Choose plan type, term length, and basic risk factors.
3. Set your budget cap as a percent of income.
4. Click Calculate to see coverage gap, premium estimate, and charts.
5. Download CSV or PDF to share with a planner or family.

• Real return rate: r = (1 + nominal) / (1 + inflation) − 1
• PV of income/expense support: PV = P × (1 − (1 + r)⁻ⁿ) / r (or PV = P × n when r ≈ 0)
• Gross need: Gross = PV(support) + debts + mortgage + education + final + emergency
• Net coverage gap: Net = max(0, Gross − assets − existing coverage)
• Premium estimate (simplified): Monthly ≈ (Net/1000) × rate × multipliers × (1+riders) + policy fee

Budget First, Coverage Second

Start with an affordability target, then size coverage to fit it. Many families aim for premiums near 2%–6% of income. On $80,000 income, a 3% cap equals $200 per month. Use this cap as your “guardrail” before requesting quotes. If the estimate exceeds the cap, adjust coverage, term years, or riders.

Discounting Support Needs

The tool discounts future support to today’s dollars using a real return rate: (1+return)/(1+inflation)−1. With 5% return and 3% inflation, the real rate is about 1.94%. Replacing $56,000 per year for 15 years produces a present value near $700,000. When the real rate is close to zero, the present value is roughly payment × years, which helps validate inputs.

Debt, Housing, and One‑Time Goals

One‑time obligations often drive the coverage gap. A $180,000 mortgage payoff plus $12,000 unsecured debt and a $30,000 education goal totals $222,000. Add final expenses, such as $12,000, because they are immediate. An emergency fund of six months on $4,500 expenses adds $27,000. Then subtract offsets: $65,000 in assets and $100,000 existing coverage reduce the need by $165,000.

Premium Drivers and Sensitivity

Premium estimates respond to age, term length, health class, smoking status, plan type, and riders. Smoking can roughly double costs, while stronger health classes can lower the estimate. Shorter terms often reduce price per $1,000 but may create renewal risk later. Permanent plans typically require larger budgets, so compare multiple scenarios. Use the rate tweak control to align estimates with local pricing observations.

Actionable Planning Checklist

Confirm current coverage from employers and personal policies. Stress‑test replacement years against childcare, tuition, and retirement timelines. Re‑run the tool after salary changes, new debts, or a home refinance. Consider laddering two smaller policies to match declining obligations. Update inflation and return assumptions annually conservatively. Export CSV or PDF outputs for consistent reviews with advisors and family.

What does the coverage gap represent?

It is the remaining protection needed after subtracting existing coverage and usable assets from the calculated total need. It helps you see how much additional benefit amount to budget for.

Why does the tool use a real return rate?

A real rate adjusts expected returns for inflation so future support is expressed in today’s purchasing power. This reduces overconfidence and makes income or expense support comparisons more consistent.

Should I include employer life insurance in existing coverage?

Yes, add any benefits your family would actually receive, including employer-provided coverage. If employment could change, consider using a conservative value or running a second scenario without it.

How do riders affect the premium estimate?

Riders can increase the estimated premium by adding optional benefits. Keep riders aligned with real needs, then recheck the budget cap to ensure the plan remains sustainable month to month.

What if the premium estimate is above my budget cap?

Try lowering the coverage scenario, shortening the term, removing riders, or increasing assets that offset the need. You can also adjust the budget percentage, but only if cash flow remains comfortable.

How often should I update my budgeting inputs?

Review at least annually and after major events such as a new child, home purchase, salary change, or debt payoff. Small updates keep coverage aligned with obligations and avoid surprise gaps.