DDanfio

Life Insurance Calculator

Most people carry the cover their employer handed them plus the multiple of salary a sales page recommended. Both are guesses. The figure that matters is what your household would need if your pay stopped tomorrow, and it has four parts: the income that has to be replaced, the debts that still have to be paid, the education you meant to fund, and the cost of settling everything.

$

The income the household would have to replace.

How long the payout stands in for your pay.

$
$

Car loans, student loans and card balances.

$

A degree, a deposit or a fund you mean to leave each child.

$

Funeral costs and the work of settling an estate.

$

Cash and investments, not the home you live in.

$

Group life from an employer plus any personal policy.

$
$

What the cheaper premium could earn over the same years.

Results update as you type. Nothing leaves your device.

Cover to buy

$1,080,000

12 times income, once $210,000 of savings and existing cover is netted off a $1,290,000 need.

Total need
$1,290,000
Already covered
$210,000
Share covered
16.3%

What the cover has to pay for

  • 10 years of income$900,000
  • Mortgage and debts$275,000
  • Education$100,000
  • Final expenses$15,000

Income replacement is usually the largest slice, and the one most often underestimated: the payout has to fund the years before the household can replace the wage itself.

The gap in other words

Cover as a multiple of income
12×
Income being replaced
$900,000
Debts to clear
$275,000
Ten years of term premiums
$9,000

How the need moves with the replacement period

Years of incomeIncome replacementTotal needCover to buy
5$450,000$840,000$630,000
10$900,000$1,290,000$1,080,000
15$1,350,000$1,740,000$1,530,000
20$1,800,000$2,190,000$1,980,000
25$2,250,000$2,640,000$2,430,000

The debts, education and final-expense figures do not change, so every extra five years adds five more years of income to the need.

Term cover against a cash-value policy over 20 years

Monthly premiumPremiums over 20 yearsWhat the difference becomes
Term policy$75.00$18,000$154,138
Cash-value policy$450.00$108,000set by the policy, not by this page

The last column invests the $4,500 a year of premium difference at 5%. It is not a claim about any policy cash value, surrender charge or loan terms: compare the guaranteed figures in the illustration you are given, not the projected ones.

Re-run this after a mortgage, a birth, a pay rise or a change of employer group cover. The need moves with the household, and so does the premium.

This calculator adds those parts up, subtracts the savings and cover you already own, and reports the shortfall both as a lump sum and as a multiple of income. It then prices the two things a policy can be: term cover, where the premium buys protection and nothing else, and a cash-value policy that costs several times as much and builds a fund you may be able to borrow against.

How this life insurance calculator works

The four parts of the need

Income replacement is the years of pay the household would lose, chosen by you rather than assumed: ten years is a common answer for a family with young children, five for a household close to financial independence, and none is a legitimate answer when a pension or a second income already covers the spending.

The debts are what has to be cleared so the family keeps the house and the car. Education is a figure you set per child, which may be the cost of a state degree or simply a fund you mean to leave behind. Final expenses cover the funeral and the work of administering an estate.

What already counts as cover

Savings, investments and any policy already in force reduce the gap one for one. Two details matter. Group life from an employer usually ends with the job, so a plan built on it can fail at the moment it is needed most. And a mortgage is only a debt if nobody is insured against it: some households deliberately buy less life cover and more mortgage protection, which is a preference about cost and certainty rather than an error.

Money in a retirement account is only spendable after tax, and a home is only spendable after selling it, so neither is counted as a resource here. Count what the family could actually lay hands on.

Term cover against cash value

Term cover pays only if you die inside the term, and it is the cheapest way to buy a large death benefit. A cash-value policy costs a multiple of the same premium for the same face amount, with part of the payment going into a fund that grows tax-deferred and can be borrowed against.

The comparison on this page is deliberately narrow: it invests the difference between the two premiums at the return you enter and shows where the difference ends up. It cannot say what a particular policy will be worth, because that depends on credited rates, surrender charges and fees that only the illustration discloses. Read the guaranteed column first and the projected column second.

Worked examples

Each example below was run through the calculator on this page when the site was built, so the numbers match what you see when you enter the same inputs.

A household with two children and a mortgage

Gross annual income
$90,000.00
Years of income to replace
10
Mortgage balance
$250,000.00
Other debts
$25,000.00
Children to educate
2
Education cost per child
$50,000.00
Final expenses
$15,000.00
Savings the family could spend
$60,000.00
Cover already in force
$150,000.00

Cover to buy

$1,080,000

12 times income, once $210,000 of savings and existing cover is netted off a $1,290,000 need.

Total need
$1,290,000
Already covered
$210,000
Share covered
16.3%
Cover as a multiple of income
12×

The gap is about twelve times income: the mortgage and the education money push the need well above the five-times-salary rule of thumb.

A single earner with a large mortgage

Gross annual income
$120,000.00
Years of income to replace
10
Mortgage balance
$400,000.00
Other debts
$15,000.00
Children to educate
0
Education cost per child
$0.00
Final expenses
$20,000.00
Savings the family could spend
$80,000.00
Cover already in force
$300,000.00

Cover to buy

$1,255,000

10.5 times income, once $380,000 of savings and existing cover is netted off a $1,635,000 need.

Total need
$1,635,000
Already covered
$380,000
Share covered
23.2%
Cover as a multiple of income
10.5×

There are no children to educate and the gap is still over a million dollars: the mortgage is large and only ten years of income are being replaced.

A household that is already self-insured

Gross annual income
$90,000.00
Years of income to replace
10
Mortgage balance
$0.00
Other debts
$0.00
Children to educate
0
Education cost per child
$0.00
Final expenses
$15,000.00
Savings the family could spend
$2,000,000.00
Cover already in force
$0.00

Cover to buy

$0

Savings and existing cover already exceed the $915,000 need, so there is nothing left to buy.

Total need
$915,000
Already covered
$2,000,000
Share covered
100%
Cover as a multiple of income
0×

Savings exceed the need, so there is nothing to buy. Insurance exists to close a gap, and here there is no gap.

Frequently asked questions

How much life insurance do I need?

Enough to cover the income the household would lose, the debts that would otherwise pass to someone else, the education you meant to pay for and the cost of settling your affairs, less the savings and cover you already hold. There is no universal multiple of salary, because two households on the same income can need very different amounts depending on the mortgage and the children.

Is ten times my salary enough?

Sometimes. On a $90,000 income with a $250,000 mortgage and two children the need runs to roughly twelve times income once debts and education are counted, and it falls well below ten times for a household with no mortgage and grown children. Treat the multiple as a sanity check on the calculation, not as the calculation.

Term or cash value?

Term cover buys the largest death benefit for the lowest premium, and the gap this page reports is a protection problem rather than an investment one, so term usually fits. Permanent cover makes sense when the need really is permanent: an estate-planning purpose, a dependant who will never be self-supporting, or a business succession arrangement. In any illustration, read the guaranteed column before the projected one.

Is the payout taxed?

Life insurance proceeds paid because of the insured death are generally excluded from the beneficiary income, under section 101(a) of the Internal Revenue Code. Estate tax is a separate question: if you own the policy on your own life and your estate is large, the proceeds can be drawn into it. That is a conversation for a tax adviser, and this page is not tax advice.

Should we count my partner income as well?

This calculator sizes cover for one earner, which is the usual case: the household loses one income and needs the hole closed. If both incomes are essential, size the larger earner first with the mortgage and debts counted in full, then consider separate policies chosen so that either loss still leaves the household able to keep the home and its plans.

What about a stay-at-home parent?

That work has a replacement cost. Childcare, transport, meals and the administration of a household all have to be bought if nobody is there to do them, so estimate that annual cost and enter it as the income to replace with the same number of years. The cover then reflects the real hole in the household rather than the size of a payslip.

Assumptions and sources

  • Method: the DIME framework, debt, income, mortgage and education, as used by most needs calculators, extended with final expenses and the netting of savings and existing cover.
  • No insurer rate table is used. Premiums are entered by you, and the term-against-cash-value comparison is arithmetic on the premiums you supply rather than a quote.
  • Life insurance proceeds are generally received free of income tax under section 101(a) of the Internal Revenue Code, while a policy owned by the insured can form part of the estate. This is not financial or tax advice.

Last reviewed 2026-09-14. This page is an estimate tool, not financial, tax or legal advice.Read the full disclaimer.

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