Start with family needs, not an income multiple
A simple “times salary” rule cannot see a mortgage, childcare, a stay-at-home caregiver’s services, existing assets, education goals, or income that would continue. This calculator uses a needs-based framework: estimate the capital required for ongoing support and immediate obligations, then subtract resources and insurance already available.
The National Association of Insurance Commissioners’ consumer guidance asks consumers to consider family income dependence, the value of services provided, final expenses, debt, ongoing bills, childcare, education, retirement, and inflation. The California Department of Insurance life-insurance guide similarly emphasizes dependents, future education, income, assets, and debt rather than one universal amount.
Define the annual household support gap
Enter the first-year spending and services survivors would need to replace, then subtract annual income expected to continue. Continuing income might include a survivor’s earnings, reliable pension income, or benefits after verifying eligibility and timing. The calculator treats the positive difference as the first-year support gap and grows that net gap at the entered annual rate.
Use after-tax household support rather than automatically entering gross salary. Include the economic value of work that would need to be purchased—such as childcare, household management, transportation, or caregiving—even when the insured person does not earn wages.
How support capital is calculated
The model finds the present value of a growing annual support stream. It assumes the first support withdrawal occurs one year after the modeled death, the support gap grows at the entered rate, and the remaining capital earns the entered net return. When return and growth are equal, the formula uses the mathematical limit instead of dividing by zero.
The return is not guaranteed. Use a rate after expected fees and taxes, and test conservative cases. A high assumed return sharply lowers the apparent capital need and shifts investment risk to survivors. Also test higher support growth, a longer dependency period, and no investment return.
Itemize immediate lump-sum obligations
The immediate-needs total includes only the amounts entered for mortgage, other debts, final or estate expenses, education, and other family needs. Do not assume every debt must be paid at death or that every asset transfers without delay. Ownership, guarantors, beneficiary designations, estate administration, taxes, and local law can change what is owed and what becomes available.
Use current statements and goals rather than rounded guesses. If the plan is to keep making mortgage payments instead of retiring the entire balance, exclude the payoff and include the appropriate housing support in annual needs instead; otherwise the mortgage can be counted twice.
Subtract only resources truly available to survivors
Liquid assets and other lump-sum resources reduce the modeled need only when they are intended and practically available for this purpose. Emergency cash, retirement accounts, jointly owned assets, business interests, property, and expected inheritances can have different liquidity, tax, market, and legal consequences. Do not count an asset merely because it appears on a net-worth statement.
The net worth calculator can organize assets and liabilities, but the amount available for survivor support may be much smaller than total net worth. Keep assets needed by the surviving household, assets already pledged to another goal, and uncertain resources outside the subtraction.
Separate individual and employer coverage
The form asks which type of coverage is actually documented before showing a death-benefit field. If coverage is uncertain, no benefit is subtracted; the result identifies that conservative treatment and points back to the insurer or employer record. This prevents hidden example amounts from making the family gap look smaller.
The result displays the gap twice: once before counting employer coverage and once after. Workplace coverage can be valuable, but continuation, conversion, benefit amount, eligibility, and employment status depend on the plan. Verify the current certificate and do not assume the benefit will remain unchanged after leaving the employer.
Existing individual coverage should be entered at the death benefit expected to be payable, not at premium paid or cash value, and only after confirming ownership, beneficiary, exclusions, loans, and current policy status. The calculator does not value policy cash value or recommend replacing a policy.
A zero gap is not an insurance recommendation
If entered resources and existing coverage meet or exceed modeled needs, the result shows no additional numerical gap and may show a surplus. That does not determine whether coverage should be purchased, retained, changed, or canceled. Timing, liquidity, beneficiary needs, taxes, estate goals, business obligations, insurability, and policy guarantees remain outside the arithmetic.
Likewise, a positive gap is a planning estimate, not an offer or approval amount. Insurers determine availability and premium through underwriting, policy terms, jurisdiction, age, health, occupation, and other permitted factors.
Choose the support period from actual dependencies
The support period might correspond to a child reaching independence, a surviving partner reaching retirement, a debt ending, or a caregiver need changing. Different obligations can end at different times. When that matters, run separate scenarios and avoid extending every expense for the longest possible period.
Review the estimate after marriage, divorce, birth or adoption, income changes, a home purchase, a major debt payoff, job changes, retirement, beneficiary changes, or a significant policy change. The NAIC recommends periodic review as income and needs change.
Stress-test the assumptions
Save at least three scenarios. A lower-need case can use shorter support and stronger continuing income. A base case can reflect current evidence. A higher-need case can use longer support, higher expense growth, lower investment return, less available liquidity, or no employer coverage. The range reveals which assumption controls the estimate.
Do not combine mutually inconsistent assumptions—for example, subtracting a retirement account as available capital while also counting the retirement income it would have produced. Each dollar should fund one purpose once.
Compare policy terms only after defining the need
Term and permanent policies can have different duration, premium patterns, guarantees, cash values, investment exposure, and flexibility. This calculator intentionally does not choose a product or estimate premium. First establish the amount and time pattern of the need, then compare written policy illustrations and guarantees that address that need within an affordable budget.
The New York Department of Financial Services consumer FAQ describes needs such as final debts, mortgage, education, spouse income, retirement, and support until children are grown. State insurance departments can also help verify whether an insurer or producer is licensed.
Keep beneficiaries and documents current
A coverage amount alone does not ensure the intended person receives or can manage the benefit. Review primary and contingent beneficiary designations, addresses, ownership, trust or estate arrangements, and where policy information is stored. Special planning may be needed for minors, dependents with disabilities, business interests, or complex estates.
Beneficiary and estate consequences are legal and tax questions. Use qualified guidance for the applicable jurisdiction rather than treating the calculator’s resource subtraction as a distribution plan.
This calculator provides general educational arithmetic, not insurance, underwriting, investment, estate, tax, legal, or financial advice. It does not recommend a coverage amount, policy type, insurer, beneficiary arrangement, or purchase. Actual needs, benefit availability, policy terms, premiums, taxes, laws, and survivor resources vary. Verify current policies, employer plans, debts, benefits, beneficiaries, and appropriate licensed or professional guidance.