How the life insurance needs estimate works
What the calculator estimates
The needs analysis combines current obligations with present values of future household support, dependent care, and education, then compares that total with explicitly entered assets and insurance.
Immediate financial needs
Mortgage, other debts, final expenses, emergency reserve, and other immediate goals are current-dollar obligations. They are added once and are not discounted.
Household support—not gross salary
Annual household support is the amount the insured person wants to continue providing. Gross salary can include taxes, savings, and spending that the surviving household may not need to replace.
Monthly income replacement
Gross support and survivor income grow at their own effective monthly rates. Survivor income reduces each month's gap, which cannot fall below zero.
Why excess survivor income does not carry
Survivor income above one month's support need is not treated as an asset or transferred to other months. It also does not reduce debts, education, care, or immediate obligations.
Present value of future expenses
Each end-of-month income or care cash flow is divided by the entered return factor for that month. The first recurring need is discounted by one month.
Effective monthly rates
Annual growth and return rates are converted as (1 + annual rate) raised to 1/12, minus 1. Dividing an annual rate by 12 would not preserve the entered effective annual rate.
Mortgage, debts, and final expenses
The mortgage has its own component and is not duplicated in other debts. Final expenses are also separate, making each immediate assumption reviewable.
Emergency reserve
The reserve equals monthly essential household expenses multiplied by the selected whole number of reserve months. It is treated as an immediate need.
Dependent-care costs
Childcare or other recurring care is modeled monthly for the entered duration, increased using its own cost rate, and discounted from each month end.
Education goal inflation
One today's-dollar education goal grows monthly until its need date, then is discounted using the return assumption. Equal annual inflation and return produce an approximately unchanged present value.
Assets and existing insurance
Liquid savings, available investments, other entered assets, individual insurance, and employer insurance reduce the additional coverage estimate. Unentered assets and benefits are never inferred.
Employer-provided coverage
Workplace coverage can depend on continued employment and may be nonportable or temporary. The calculator includes only the amount entered and cannot evaluate the plan contract.
Total need versus coverage gap
Total financial need is the gross Base planning need before resources. The coverage gap or surplus subtracts that need from entered resources, while additional coverage is the shortfall floored at zero.
Needs analysis versus DIME
The main analysis models monthly inflation, survivor income, dependent care, and present value. DIME is a simplified secondary comparison that adds debts, final expenses, income times years, mortgage, and today's education goal.
Lower, Base, and Higher scenarios
Planning multipliers change gross support, care, education, and other immediate goals. Fixed obligations, survivor income, resources, and insurance remain identical across scenarios.
Planning horizon—not policy term
The longest modeled horizon is the maximum of income replacement, dependent care, and education timing. It is informational and does not determine an appropriate policy duration.
Deterministic projection limits
Constant rates keep the mechanics transparent, but actual household costs, income, education inflation, coverage, and investment returns change over time and may not follow a smooth path.