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Income Based Life Insurance Calculator

Last updated 29th Nov 2022

This life insurance calculator figures out the level of life insurance you might need based on your earning potential or the income you provide to your family. The calculator uses your current salary, fringe benefits, along with your expenses to estimate your life insurance needs and potential insurance gaps that may exist.

Calculator Definitions

The variables used in our online calculator are defined in detail below, including how to interpret the results.

Current Age (Years)

This is your current age, stated in years.

Anticipated Retirement Age (Years)

This is the anticipated age at which you will retire from the workforce. This calculator uses the difference between your current age and retirement age to calculate the number of years you will contribute income to your family.

Annual Income ($ / Year)

This is your annual income or salary. This value should include your base pay, commissions, and all bonuses paid each year.

Expected Annual Increase (% / Year)

This is your expected annual increase to your annual income. This increase can come from raises, promotions, or changing jobs.

Fringe Benefits ($ / Year)

This is an estimate of how much you would pay to replace your employer provided fringe benefits such as health care, dental plans, long term care, and day care.

Income Tax Bracket (%)

This is your income tax bracket. If you're not sure of your exact bracket, 28% is the most common value.

Monthly Expenses ($ / Month)

This is an estimate of the amount you spend each month on yourself for expenses like clothing, travel, food, and entertainment. Do not include costs associated with your home such as mortgage payments or property taxes.

Investment Rate of Return (% / Year)

This is where you would enter the rate of return you believe your family could earn on your life insurance proceeds.

Current Life Insurance ($)

This is the current amount of life insurance that you have either through an individual policy or a group policy through your employer.

Years of Coverage (Years)

The years of coverage are simply the difference between your current age and your anticipated retirement age. This is the number of years that your life insurance will provide replacement income.

Calculated Life Insurance Needs ($)

This value is the calculated life insurance estimate, based on the variables you've provided. In this example, the calculator provides an insurance estimate based on the need to replace the income you are providing to your family between now and retirement.

Potential Life Insurance Gap ($)

The potential life insurance gap is the difference between your current level of life insurance and the calculated life insurance needs. If the calculated insurance need is less than or equal to the current life insurance, the result will be zero.

Insurance Needs and Balance ($)

The insurance needs and balance table shows how the calculated life insurance needs will be used over time. The first column of information shows the income need for each year, while the second column shows the declining balance of the insurance proceeds over time.

Income Based Life Insurance Calculator

Disclaimer: These online calculators are made available and meant to be used as a screening tool for the investor. The accuracy of these calculations is not guaranteed nor is its applicability to your individual circumstances. You should always obtain personal advice from qualified professionals.

Moneyzine Editor

Moneyzine Editor