InsuranceNeedsCalculator

Insurance Needs Analysis

Add up every obligation insurance would have to meet and subtract the resources already in place, to reach a defensible coverage figure.

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Free · No sign-up · Runs in your browser

There are two ways to decide how much insurance to buy. One is to take a multiple of income, which is fast and arbitrary. The other is to add up what the money would have to do, which takes ten minutes and produces a number with reasoning attached.

This analysis does the second. It is the same structure an adviser uses, run in the open so you can see which obligation is driving the total and change any assumption you disagree with.

Your numbers

Results update as you type. Nothing is sent anywhere.

Result

Additional cover needed

$1,482,000

Total need
$1,674,000
Income replacement
$1,248,000
Debt payoff
$301,000
Education
$110,000
Final expenses
$15,000
Existing resources
$192,000
Share covered
11.47%
Surplus
$0

This is an estimate based on the values you entered. Actual premiums, coverage, eligibility and pricing vary by provider and by individual circumstances.

This method adds up obligations rather than applying a rule of thumb multiple of income. It ignores inflation and any investment return on the payout - the present-value tool handles those.

Coverage needs change with every major life event. Re-run this whenever income, debts or dependants change.

Needs analysis

ItemAmount
Income replacement (16 years)$1,248,000
Mortgage balance$285,000
Other debts$16,000
Education costs$110,000
Final expenses$15,000
Total need$1,674,000
Existing coverage and savings-$192,000
Coverage gap$1,482,000

How to use the insurance needs analysis

  1. Enter the annual income that would need replacing and the number of years it should last.
  2. Add the mortgage, other debts, expected education costs and final expenses.
  3. Enter existing cover and savings that would genuinely be available.
  4. Read the gap, then look at the breakdown to see which item dominates it.

What people use this for

  • Deciding a coverage amount before requesting quotes.
  • Checking whether existing cover is adequate after a life change.
  • Understanding why an adviser recommended a particular figure.
  • Recording the reasoning behind a coverage decision.

Worked examples

Every figure below is produced by running this calculator against the example inputs, so the numbers always match the tool.

A household mid-mortgage

$78,000 of income for 16 years, a $285,000 mortgage, $16,000 of other debt, $110,000 of education costs and $15,000 of final expenses, against $150,000 of cover and $42,000 saved.

Additional cover needed
$1,482,000
Total need
$1,674,000
Income replacement
$1,248,000

A household with no dependants

The same income with no years of support needed, a small mortgage and no education costs.

Additional cover needed
$0
Share covered
231.33%
Surplus
$109,000

The four categories that matter

Income replacement funds the household for a defined number of years. Debt payoff removes obligations that would otherwise transfer. Education is usually the largest single future commitment for families with children. Final expenses cover what falls due within weeks.

A fifth category people add and should not is a lifestyle upgrade. Insurance prevents a financial collapse; it is not a mechanism for funding something the household was never going to afford anyway.

Why the answer keeps changing

The need peaks when debt is highest and dependants are youngest, then falls as the mortgage amortises, children become independent and savings build. Two households on identical incomes at different stages need very different amounts.

That is the argument for reviewing the figure every few years rather than setting it once. A number that was right at thirty-five is usually well above what is needed at fifty-five.

Methodology and assumptions

What this calculator does, and what it deliberately does not do.

  • Total need = (annual income × years) + mortgage + other debts + education + final expenses.
  • The gap subtracts existing cover and liquid savings. Inflation and investment return on a payout are not modelled here.
  • All figures are estimates produced from the values you enter. This site has no rate feed and no carrier data, so it cannot quote or price a policy.
  • Nothing you type is transmitted or stored - the calculation runs entirely inside your browser.

This calculator provides an estimate based on the information you enter. Actual insurance premiums, coverage, eligibility and pricing vary by provider and individual circumstances.

This website is not an insurance company, an insurance agency or a licensed broker. It does not sell insurance, does not provide insurance quotes, and is not authorised to give advice about which policy you should buy.

No result produced here is an offer of insurance or a guarantee of coverage. Only a licensed insurer or agent, working from your verified details, can quote or bind a policy.

Frequently asked questions

How many years of income should I replace?

Usually the years until the youngest dependant is independent, or until a partner reaches retirement. There is no single correct answer, which is why it is an input.

Should employer cover count?

Count it, while noting that most group cover ends with the job. If it is a large share of the total, that dependency is worth recognising.

Does this include inflation?

No. It adds obligations in today’s money. Use an income replacement calculation to bring inflation and investment return into the figure.

What if the result is much larger than I expected?

That is common, and it usually means the income replacement period or the education figure is doing the work. Adjust those to what you actually intend and re-read the total.

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