Life Insurance Calculator
With the unfortunate loss of a spouse, a dual-income family suddenly becomes a single-income family. Life insurance is a commonly used financial tool to replace that lost income. Please use our life insurance calculator as an educational guide.
What size benefit does your family need?
Typically, surviving family members will deposit the life insurance benefit - as one lump sum - into a conservative savings account. The idea is to regularly withdraw the earned interest along with a portion of principal. Thus, the account is gradually spent down.
Now, to build our calculator, let's make several assumptions. (1) Final expenses are $25,000. (2) A 5% interest rate is available on the lump sum investment. (3) Your family is in the 28% tax bracket. Based on these assumptions, the below life insurance calculator gives an idea of what size the initial lump sum benefit must be, in order to replace a specific monthly income. (More detailed instructions are below.)
Life insurance calculator instructions
(1) Using today as your starting point, think into the future; for how many years might your family need to replace your lost income? Ten years? Twenty years? Thirty years? Select the appropriate green column in the life insurance calculator.
(2) How much income do you anticipate earning each month? A safe estimate might be a little higher than you're currently earning per month, to account for inflation. Select the appropriate number in your column.
(3) Staying in the same row, look at the corresponding number in the blue column. That number represents how much life insurance you'd need to purchase today in order to meet your goal of replacing lost income.
Life Insurance Calculator, BYG Publishing