Life
Insurance Needs






This calculator is designed to determine the
amount of money needed for life insurance. The two methods of calculating
life insurance needs will result in different estimates. The human life
approach is more sensative to the age of the insured, whereas the capitalized
earnings approach will be sensitive to the expected annual earnings rate of
return and inflation.














Current
Age






Expected
retirement age






Expected
annual inflation rate (%)






Expected
annual inflation rate of income (%)






Expected
annual earnings rate (%)


















Pretax
current annual gross income





Percent
of income used to pay taxes (Federal & State)





Percent
of aftertax income used to pay for expenses unique to insured






Family
needs in annual pretax dollars












Life Insurance Needed









Human
Life Approach






Capitalized
Earnings Approach







Note:
1) We have not included the needs based approach since it generally understates needs.
2) The capitalized earnings approach does not take into consideration the number of working years. Rather, it capitalizes the earnings based on the spread between the earnings rate and the inflation rate.
3) From numerous applications of the these methods (and the needs approach) we have developed a benchmark metric of 1218 times gross pay as the general guide for life insurance needed.

