Life insurance needs calculator
How much cover your family would need if you died tomorrow, including the business loans you personally guaranteed, and how much of it is already in place.
- Income replacement, today’s value
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- Personally guaranteed business debt
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- Mortgage and other debts
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- Education, goals and final expenses
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- Total need
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- Cover and liquid assets in place
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- Ten times income, for comparison
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What this is actually calculating.
This is a capital-needs estimate. It adds up what your family would need on the day: enough invested to replace your income for the years they depend on it, every debt that would land on them, and the goals you would still want paid for. It then subtracts what is already there to meet that, which is the cover you hold and the liquid assets they could reach. What is left is the gap.
The line most calculators leave out is the personal guarantee. Business owners sign them for bank loans, SBA loans, lines of credit and leases, and a guarantee does not end at death. It becomes a claim against your estate, often at the moment the business is least able to pay, because many loan agreements treat the guarantor's death as a default. That is why a rule of thumb like ten times income can leave an owner badly short.
The parts that decide the answer.
Guarantees survive you
A personally guaranteed loan is a debt of your estate once you die, whatever the business is worth. Count the full balance you have guaranteed, including lines of credit at their drawn amount and the remaining rent on any lease you signed for personally.
Don't count the business as cash
The business is left out of the assets on purpose. It cannot pay a bill on the day, a forced sale rarely gets full value, and a company that depends on its owner may be worth much less without you. If a buy-sell agreement would pay your family a fixed sum, that is the place to include it, as liquid assets.
Income is valued in today's dollars
Replacing $250,000 a year for 15 years does not take $3.75 million. It takes the lump sum that, invested at the assumed return, pays that amount each year until it runs out. A lower return needs a larger sum; set the return to roughly what a cautious portfolio might earn after inflation.
Retirement accounts count after tax
If you include IRAs or a 401(k) in liquid assets, use what your family would keep after income tax on withdrawals, not the balance on the statement.
Run it for each earner
Cover is personal. If both spouses earn, or one runs the household in a way that would cost money to replace, work out a separate figure for each.
I don't sell insurance
I size the need and look at how it fits the rest of the plan. You buy the policy elsewhere, usually through an independent agent, so the answer to how much cover you need is never tied to a commission on selling it.
Before you rely on it.
Why not just ten times my income?
Because it ignores debts. For a salaried employee with a mortgage it is often close enough. For an owner with personal guarantees on business borrowing it can be short by the full amount of those guarantees, which is often more than a year or two of income.
Term or permanent?
Most of this need falls over time as loans are paid down and children grow up, which is the shape term cover fits. Permanent cover has other uses, such as estate liquidity or funding a buy-sell agreement, that are worth a separate conversation.
What about key person or buy-sell insurance?
Those are policies the business owns, to protect the company or to fund a purchase of your shares. They are separate from this, which is the cover your family needs personally. If a buy-sell agreement would pay your estate, include that amount as a liquid asset.
About this calculator.
An illustration, not advice
This is an educational illustration, not investment, tax, or legal advice, and not a recommendation or projection of any particular result. It uses only the assumptions you enter.
Real returns are not this smooth
Where a return is involved it is treated as constant, which no real portfolio is. Actual results will differ, and a sequence of poor early returns can change an outcome substantially even when the average holds.
Nothing you type leaves your browser
Every calculation runs on your own machine. Nothing you enter is transmitted or stored, and none of it reaches me unless you ask for a PDF and give me your details.
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