Do It Yourself Worksheet (Click to download PDF)

As you create your insurance plan, remember that life insurance is not for you, it is for your survivors. Therefore, typically, you will only have a need for life insurance when you are leaving behind some one or some entity that is dependent on your income.

No method is perfect. Life brings many changes and your needs will change with them. The more assumptions you make, the more complex you will make your planning, and the more likely something will not work as planned. This does not mean that you should only use the simplest methods — it is to give you a concept of why it is important to actively participate in all of your planning, fully understand it, and monitor it. After all, it is your money. Remarkably, the simplest formulas can often be the best.

This worksheet is designed to assist you in calculating how much life insurance is needed for your survivors. The calculations include the income needs of survivors, ongoing household expenses, other one-time expenses that are incurred such as funeral costs, and assets that can offset life insurance needs.

MY LIFE INSURANCE WORKSHEET (Download in Excel here):

Income Needs

1. Annual income your family would need if you die today (typically between 60%–80% of total income)—Consider any lifestyle changes, and include any current expenses such as mortgage/rent, groceries, clothing, utility bills, entertainment, travel, transportation, childcare, etc:

$______________

2. Annual income available to your family from other sources – Include all salaries, dividends, interest, current (or estimated), social security benefits, property rental income, along with all other sources of income:

$______________

3. Annual income to be replaced (subtract line 2 from line 1) :

$______________

4. Funds (Capital) needed to provide income for your required number of years. Multiply line 3 by the appropriate factor: 10 YEARS X 8.1; 15 YEARS X 11.1; 20 YEARS X 13.6; 25 YEARS X 15.6; 30 YEARS X 17.3; 35 YEARS X 18.7 and 40 YEARS X 20.0

$______________

Expenses

5. Funeral Expenses (average cost of an adult funeral is about $10,000):

$______________

6. Administrative Expenses (also referred to as an Emergency Fund and/or Final Expenses). This can be approximately six months or 50% of the higher wage earner’s annual salary, and can vary for cleaning up the affairs of the deceased, e.g., advisor fees, filing taxes, etc.:

$______________

7. Mortgage and other outstanding debts (credit card debt, car loans, home equity loans, etc). It may make sense to pay off these debts – depending upon the survivor’s income:

$______________

8. College costs**

For the years 2009-2010, the cost of a four-year education was $60,852 (public) and $182,544 (private). Multiply this by the number of children and keep in mind that these costs are increasing more rapidly than inflation.

$______________

9. Capital needed for college. Multiply line 8 by the appropriate years before college factor * - 5 years X .82; 10 years X .68; 15 years X .56 and 20 years: X .46

$______________

10. Total capital required.

Add lines 4, 5, 6 and 9:

$_______________

Assets

Keep in mind that current asset value may be considerately different at time of liquidation and the value may be significantly discounted due to a forced sale of real estate, family business or other investment.

11. Bank accounts, money market accounts, CDs, stocks, bonds, mutual funds, real estate:

$_______________

12. Retirement savings IRAs, 401(k)s, Keoghs, pension and profit sharing plans:

$_______________

13. Present amount of life insurance (including group life insurance, assuming that it will continue):

$_______________

14. Total income producing assets - Add lines 11, 12 and 13:

$_______________

15. Life insurance needed - Subtract line 14 from line 10:

$_______________

* Factors: Inflation is assumed to be 3%. College costs indexed at 6%. The rate of return on investments is assumed to be 6% after tax.

** Source: The College Board, Trends in College Pricing 2009 Information and factors are based on information from the Life and Health Insurance Foundation for Education, a nonprofit organization.