Life Insurance Calculator
How much life insurance do you need? Enter your current assets, expense and income. You can also adjust the inflation rate and your expected rate of return to see how these variables can impact your insurance needs. Press the “View Report” button to see a year by year breakdown of your family’s future income and expenses.
While this calculator can provide you with some insight, it was developed to be very general and may not fit everyone’s personal situation. Please feel free to contact our office after using this calculator so that we can perform a more thorough analysis.
- Current life insurance coverage
- Total amount of life insurance coverage you currently have for yourself.
- Years for insurance income to last
- Number of years your spouse will need to use your insurance proceeds to provide for living expenses and income.
- Inflation rate
- What you expect for the average long-term inflation rate. A common measure of inflation in the U.S. is the Consumer Price Index (CPI). From 1925 through 2011 the CPI has a long-term average of 3.0% annually. Over the last 31 years highest CPI recorded was 13.5% in 1980. Your total expenses are increased by this rate for each year you require income. The income you would receive from your life insurance policy is used to cover any shortfalls between your expected income from all sources and your expenses.
- Return on investments
- The annual rate of return for your investments. The actual rate of return is largely dependent on the type of investments you select. The actual rate of return is largely dependent on the type of investments you select. The S&P 500 for the ten years ending on December 31st, 2011 had an annual compounded rate of return of 2.92%, including reinvestment of dividends. From January 1970 through the end of 2011, the average annual compounded rate of return for the S&P 500, including reinvestment of dividends, was approximately 10.01% (source: www.standardandpoors.com). Since 1970, the highest 12-month return was 61% (June 1982 through June 1983). The lowest 12-month return was -43% (March 2008 to March 2009). Savings accounts at a bank may pay as little as 0.25% or less but carry significantly lower risk of loss of principal balances.
It is important to remember that these scenarios are hypothetical and that future rates of return can’t be predicted with certainty and that investments that pay higher rates of return are generally subject to higher risk and volatility. The actual rate of return on investments can vary widely over time, especially for long-term investments. This includes the potential loss of principal on your investment. It is not possible to invest directly in an index and the compounded rate of return noted above does not reflect sales charges and other fees that funds and/or investment companies may charge.
Insurance products may additionally include mortality, expense risk charges, cost of insurance, administrative, and surrender charges that will have a significant impact on the total rate of return for the investment.
- Income tax
- This is your income tax rate. Changing this rate only affects your interest income from your investments. All other income and expenses should be entered on an after-tax basis.
- Cash and savings
- Total you have in cash, checking accounts, savings accounts or other accounts that can be used to help cover expenses.
- Home equity
- Total amount of equity in your home that you are willing to use toward your living expenses. Only include the home equity that you consider available to use toward your living expenses. For example, the equity you would make available by selling your home and moving into a smaller one.
- Total value of all investments that you are willing to use toward your living expenses.
- Any other assets that you may be willing to sell or liquidate.
- Estate or inheritance taxes on assets
- Taxes that are required to be paid on your assets at death.
- Probate costs
- Probate costs cover a state’s legal fees for disbursing the assets of the deceased. You may incur significant probate costs, depending on your state of residence, even if you have a will.
- Funeral costs
- All costs required to cover the cost of the funeral.
- Uninsured medical costs
- Any medical costs that are not covered by your medical insurance. Make sure to include any deductibles.
- Debt repayment
- Credit card debt, auto loans, home equity loans, mortgages or other debt that you wish to repay. Providing the ability to repay these loans if you were to die can significantly help your family meet their monthly living expenses.
- Other expenses
- Any other items that you need to pay with your insurance proceeds.
- College fund for children
- Amounts you wish to provide your surviving children to cover future college expenses.
- Spouse income from work
- Income expected from your spouse after your death. If your spouse needs education or retraining, make sure that the starting year for this income provides adequate time to complete.
- Social security survivor benefits
- Depending on your work history, your family may qualify for Social Security benefits. Typically, Social Security benefits for the widow/widower cease when the youngest child turns 16. The child’s benefit generally continues to age 18. Once the children are gone, Social Security benefits are generally not available until the widow/widower turns age 60.
- Living expenses with children at home
- Total monthly expenses while your children are living at home. This should include all monthly expenses except child care.
- Living expenses with children gone
- Total monthly expenses after your children have left home. This should include all monthly expenses.
- Children’s education expenses
- Monthly expenses for your children’s education expenses. If your children have not yet entered college, and have no other educational expenses, leave this amount at zero and enter an amount in the college fund entry fields in the total expenses at death section.
- Retraining and education for spouse
- Monthly expenses expected to cover any cost of education or retraining for your spouse to re-enter the workforce.
- Other expenses
- Any other monthly expenses not included above.
- Savings balance
- The amount of funds available to your family after your expenses at death have been covered. This includes any current life insurance.
Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.
Calculators are provided by an independent third party and are being made available to you as self-help tools for your independent use and are not intended to provide investment advice or be representative of actual results. We do not guarantee their applicability or accuracy in regards to your individual circumstances. The determinations made by these calculators should not be construed as guarantees or projections. Moreover, the reasonableness of certain information may change over time because of changes in tax law, investment trends and your personal circumstances. The information contained here is based on current law and has been obtained from sources believed to be reliable, but we do not guarantee its accuracy. Investment results can vary considerably depending on the type of securities involved, general market conditions and other factors. It is important that you periodically review and update your plans. Raymond James does not provide tax or legal advice. You should contact your tax or legal advisor concerning your particular situation. All investments carry a degree of risk, and past performance is not a guarantee of future results.