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Example data
These rows show sample inputs and how the gap can change. Values are illustrative only.
| Annual income | Years | Immediate needs | Resources | Estimated shortfall |
|---|---|---|---|---|
| $60,000 | 20 | $102,000 | $150,000 | $245,000 |
| $80,000 | 25 | $140,000 | $200,000 | $520,000 |
| $45,000 | 15 | $75,000 | $120,000 | $145,000 |
Insights
Coverage gap overview
Shortfall is the difference between estimated family needs and available resources. In this calculator, needs combine one‑time obligations with income support discounted into today’s money. Resources include savings plus existing and employer benefits. A positive gap suggests additional coverage may be needed.
Income support present value
Income support is modeled as a level annual amount for a chosen number of years. The present value uses an annuity formula, which reduces long future streams into a single figure. If you enable inflation adjustment, the tool uses a real discount rate based on expected return and inflation.
Immediate obligations and goals
Immediate needs include debts, final expenses, education funding, and other goals. These items are treated as near‑term cash requirements, so they are not discounted. Enter conservative numbers for debts and family goals to avoid underestimating the amount required during a difficult transition.
Resources and policy structure
Resources can be a mix of liquid assets and coverage already in force. Employer benefits may end after employment changes, so review plan rules and portability. Existing policies can have exclusions or waiting periods. Listing each resource separately helps you see which parts are reliable and which are uncertain.
Using sensitivity for decisions
The sensitivity section tests how the gap changes when assumptions move. A one‑point shift in discount rate can materially change the present value, and a ten percent income change can widen or shrink the gap quickly. Use the buffer setting to build margin for unknowns. for real households today for real households today for real households today for real households today for real households today for real households today for real households today for real households today for real households today for real households today for real households today for real households today for real households today for real households today for real households today for real households today for real households today for real households today for real households today for real households today for real households
FAQs
1) What does “shortfall” mean here?
It is the amount by which estimated total needs exceed your listed resources. If the number is zero, resources meet or exceed the modeled need.
2) Why is income discounted instead of summed?
Future income support is converted to a present value using a discount rate, reflecting that money today can be invested and that future payments are worth less in today’s terms.
3) When should I enable the inflation option?
Enable it when you want the discount rate to reflect purchasing power. The tool converts expected return and inflation into a real rate before valuing the income stream.
4) What is the tax option doing?
If enabled, the calculator increases the income replacement amount to cover an estimated tax rate, so the after‑tax support better matches your target household spending.
5) How should I pick the support years?
Common choices align with major milestones such as children finishing school or a spouse reaching retirement. Many households model 10–30 years, then compare outcomes.
6) Is the recommended coverage a final answer?
No. It is a planning estimate based on your inputs and a selected buffer. Policy costs, eligibility, and real household changes should also be considered before purchasing coverage.
Formula used
This tool estimates total protection needed as: Total Need = Immediate Needs + Present Value of Income Support. Immediate needs include debts, final expenses, education funding, and other goals.
The income component uses an annuity present value: PV = P × (1 − (1 + r)−n) / r, where P is annual income support, n is years, and r is the discount rate. When inflation is included, the discount rate is a real rate computed from expected return and inflation.
The shortfall is: Shortfall = max(0, Total Need − Total Resources). Recommended coverage applies an optional buffer percentage to the shortfall.
How to use this calculator
- Enter the annual income your household would need to replace.
- Choose how many years that support should last.
- Add one-time needs like debts, final expenses, education, and other goals.
- List resources available to cover the need, including existing coverage and savings.
- Set return and inflation assumptions; enable real discounting if desired.
- Click Calculate to see total need, resources, and the coverage shortfall.
- Use the CSV or PDF buttons in the results panel for downloads.