Calculator Inputs
Example Data Table
| Annual Expenses | Years | Inflation | Return | Assets | Existing Coverage | Illustrative Gap |
|---|---|---|---|---|---|---|
| 24,000 | 15 | 3.0% | 5.0% | 15,000 | 25,000 | 270,709 |
| 36,000 | 20 | 3.5% | 5.5% | 25,000 | 50,000 | 507,475 |
| 50,000 | 25 | 4.0% | 6.0% | 40,000 | 75,000 | 842,159 |
| 30,000 | 10 | 2.5% | 4.5% | 10,000 | 20,000 | 243,577 |
| 42,000 | 30 | 3.0% | 5.0% | 60,000 | 100,000 | 770,611 |
Formula Used
The calculator estimates a coverage amount that can fund a future stream of living expenses and any one-time needs, then subtracts available assets and existing coverage.
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Adjusted expenses:
AdjustedAnnual = max(0, AnnualExpenses − SurvivorBenefits) -
Present value of expenses (growing annuity):
PV = P × (1 − ((1+g)/(1+r))^n) / (r − g)WherePis the adjusted annual expense,ginflation,rreturn,nyears. -
Total needs:
TotalNeeds = PV + Debts + FinalExpenses + Education + OtherOneTime -
Total assets:
TotalAssets = Savings + OtherAssets + ExistingCoverage + EmployerCoverage -
Coverage gap:
Gap = max(0, TotalNeeds − TotalAssets) -
Recommended coverage:
Recommended = roundUp(Gap × (1 + Buffer%), RoundTo) -
Illustrative premium:
AnnualPremium ≈ (Recommended / 1000) × RatePer1000
How to Use This Calculator
- Enter your current annual household expenses.
- Set how many years you want those expenses protected.
- Add debts and one-time goals such as education funding.
- Subtract savings and existing coverage already in place.
- Adjust inflation and return assumptions to match your plan.
- Review the recommended coverage and estimated premium range.
- Export results as CSV or PDF for recordkeeping.
Expense Replacement Benchmark
Start with annual household expenses, then subtract reliable survivor benefits. A 30,000 yearly gap, protected for 20 years, is the core driver of coverage. With 3% inflation and a 5% return, the present value is about 478,944, before adding debts or final costs. If you add 10,000 final expenses and 20,000 debts, needs rise to 508,944.
Inflation and Time Horizon
Inflation compounds quietly. Moving inflation from 3% to 4% in the same 20‑year example lifts the present value to roughly 522,566, a 43,622 increase. Extending the horizon from 20 to 30 years at 3% inflation and 5% return raises the present value to about 687,602. Longer horizons should match dependent ages, mortgage length, or planned retirement timing.
Discount Rate Sensitivity
The return assumption is a planning lever, not a promise. Lowering the return from 5% to 4% with 3% inflation increases the present value to about 527,143. That shift alone can change recommended coverage by tens of thousands. Conservative plans often use a return near the expected bond‑heavy portfolio, while aggressive plans may model higher returns and pair them with a larger safety buffer.
Asset Offsets and Coverage Gap
Coverage is needs minus resources. Savings, liquid investments, and existing policies directly reduce the gap. For example, 60,000 in combined assets and existing coverage reduces a 508,944 need to 448,944. Employer coverage can help, but portability and expiration matter. Rounding to common increments, like 10,000, keeps the recommendation practical for shopping.
Premium Affordability Check
The calculator estimates an illustrative premium using a per‑1,000 rate influenced by age, term length, smoking, and health class. Use it to compare scenarios: quitting smoking or improving health class can materially reduce annual cost. If the premium feels tight, shorten term, adjust buffer, or increase assets earmarked for protection. After choosing coverage, stress‑test the premium against your monthly budget and update inputs each year as expenses and assets change.
FAQs
1) What expenses should I include?
Include recurring costs your household must pay if income stops: housing, utilities, food, transport, insurance, and childcare. Add debts, final expenses, and education as separate line items so the model can treat them as one‑time needs.
2) Why model both inflation and return?
Inflation grows future spending, while the return rate discounts future payments to today’s dollars. The gap between them drives the present value. Small changes can shift coverage significantly, so test conservative and optimistic scenarios.
3) What happens if return equals inflation?
When return and inflation match, the growing‑annuity formula becomes unstable. The calculator switches to a simplified case that treats each year’s expense as equally valued in discounted terms, producing a smooth, practical estimate.
4) How should I treat employer coverage?
Employer coverage can reduce the gap, but confirm portability, beneficiaries, and when it ends. If coverage stops when employment changes, consider discounting it or setting it to zero for a more resilient plan.
5) How often should I update inputs?
Review at least annually and after major life events: marriage, children, a mortgage, income changes, or new debt. Updating expenses, assets, and existing coverage keeps the recommendation aligned with your current financial reality.
6) Is the premium output a real quote?
No. It is an illustrative estimate based on a simplified per‑1,000 rate and risk factors. Actual premiums depend on underwriting, medical history, location, riders, and carrier pricing. Use it to compare scenarios, then request formal quotes.
Important Notes
- This tool is for planning and education only.
- Actual pricing varies by underwriting, jurisdiction, and carrier.
- Consider beneficiary needs, taxes, and policy features separately.