How it works
A coverage gap timeline audits the life insurance you actually hold against the need your family actually has, one year at a time — because both sides move. The need side declines steadily: mortgage principal amortizes, children march toward independence, and savings compound into self-insurance, which together typically shed four to six percent of a family's need every year. The coverage side does not decline smoothly — it holds level, then falls off a cliff the day a term policy expires. The calculator walks the two curves forward and flags every year where the surviving coverage dips below the estimated need: when the gap opens, how deep the worst year is, and the cumulative dollar-years of exposure. That cliff is where ladders fail in practice. A policy bought twenty years ago was sized against a need that has since shrunk, but the surviving tiers were sized against guesses, and one misjudged expiry strands the family for a decade. The remedy the numbers point to is usually small: a modest bridge policy covering just the flagged years costs far less than oversizing everything forever. Re-run the audit whenever a policy approaches expiry, a child arrives, or the mortgage recast changes the curve.
Formula
need(t) = need today x (1 - shed %)^t | coverage(t) steps down at each expiry | gap(t) = max(0, need(t) - coverage(t))
Tips
- Check the table around each expiry year — the cliff, not the average, is what strands families.
- A gap of a few years is often cheapest to close with a small new term policy, not by oversizing the ones you own.
- Re-run the audit after refinancing or recasting — the need curve bends when the mortgage does.
- Remember group life vanishes with the job; only policies you own personally survive an employer change.
- Model the need honestly downward — insuring a peak that retired years ago is expensive nostalgia.
Frequently asked questions
- When does a life insurance coverage gap usually open?
- Most often the day a term policy expires, because coverage falls instantly while the family need has only declined gradually. On typical inputs a twelve-year tier expiring leaves survivors short unless the remaining policies were deliberately sized to the need at that moment — which is exactly what this timeline checks.
- How fast does life insurance need shrink?
- Commonly four to six percent a year. Mortgage principal retires faster than people expect, children cost less each year toward independence, and liquid savings quietly become self-insurance. A need of one million dollars today may be nearer six hundred thousand a decade in, even before any policy change.
- Is it normal to have multiple life insurance policies?
- Yes — stacking several term policies with different end dates is standard practice among planners. Insurers simply ask about other coverage in the application. The complexity is bookkeeping: someone must track which policy ends when, and confirm the survivors still cover the need at each expiry.
- What should I do if my coverage drops below my family's need?
- Price a small bridge policy covering just the shortfall years rather than replacing everything. A five-hundred-thousand-dollar, fifteen-year term for a healthy forty-year-old is often cheaper than the latté budget. If health has changed, conversion rights inside the expiring policy may be the only guaranteed path.
- Does group life insurance count toward my coverage?
- While you hold the job, yes. But basic group coverage almost never ports when employment ends, and voluntary supplements port only at sharply higher re-rated premiums. Count it in the timeline today, but treat it as coverage with an expiry date tied to your employer, not to a contract you control.