How it works
Term life insurance exists to replace a paycheck, then retire quietly. The classic needs-based method adds three numbers — the income your family would need over the years until independence (income x years), the debts they would inherit (mortgage, loans, cards), and final expenses like a funeral — then subtracts what already exists: savings, investments and workplace life cover. The result is the coverage amount that keeps your family's plan intact if you die tomorrow. The engine keeps each ingredient visible because the answer is only as honest as the inputs: skipping the mortgage line understates the need by exactly that balance. It assumes the invested death benefit earns while paying out; the years-to-cover field is the strongest lever — covering 20 years instead of 30 reduces the need dramatically, which is why term insurance gets cheaper the sooner kids become self-sufficient. Every field in this calculator exists for a reason. Enter Annual income to replace, Years to cover, Outstanding debts, Final expenses, Existing assets and policies, All inputs stay in your browser. Adjust one field at a time to see which lever moves the answer most — the formula on this page lets you verify every step against the defaults shown in the worked example.
Formula
Need = (Income x Years) + Debt + Final expenses - Existing assets
Tips
- Cover the mortgage balance explicitly — it is the largest line in most plans.
- Count workplace group life, but remember it usually ends when the job does.
- Term, not whole life: the need is temporary, so the product should be too.
- Re-run every five years and after births, marriages, mortgages.
Frequently asked questions
- How much life insurance do I need?
- The needs-based formula — income times years to independence, plus debts and final expenses, minus existing assets — is the standard answer. For most families with young children that lands between 10 and 20 times annual income. This calculator computes your exact number from your own inputs.
- Term vs whole life — which is better?
- Term insurance covers you for a set period and costs a fraction of whole life, which bundles an investment component. For the vast majority of families, a 20-30 year term policy matches the need and frees the difference for investing. Whole life makes sense mainly for estate-planning wealth transfer, not income replacement.
- Should I include my existing workplace coverage?
- Yes — subtract it from the need. But remember group life through an employer usually terminates when you leave the job, so your individual policy should cover the full need on its own if you value portability.
- How often should I recalculate coverage?
- After any life event that changes the equation: a child, a mortgage, a marriage, a divorce, a big salary change, or every five years as a habit. The number drifts quietly otherwise.