A life insurance needs simulator projects your family's financial trajectory in two parallel scenarios — with and without the primary earner's income. Unlike simple multiplication formulas, this simulator shows exactly when and by how much your family would run short, and calculates the precise coverage needed to close that gap.
Family Financial Profile
Including housing, food, childcare, utilities
Simulation runs until age 18
Family Net Worth: Both Scenarios
Year-by-Year Projection
| Year | Dep. Age | Scenario A Balance |
Scenario B Balance |
|---|
How to Use the Life Insurance Needs Simulator
Most life insurance calculators give you a single number — typically 10-12 times your salary. But that rule-of-thumb ignores your spouse's income, existing assets, debt load, and how long your dependents actually need support. This life insurance needs simulator runs a full year-by-year financial projection to find the exact coverage gap in your specific situation.
Step 1: Enter Your Family's Financial Profile
Input the primary earner's income (the person being insured), your spouse or partner's income, and total annual household expenses. Include everything in expenses: mortgage payment, childcare, groceries, utilities, and discretionary spending. The key number is the income gap — if primary earner income is $95,000 and spouse income is $45,000, losing the primary earner creates a $50,000/year shortfall before expenses are considered.
Step 2: Add Debts and Existing Coverage
Mortgage balance and other debts are entered separately because they're lump-sum liabilities that must be paid regardless of income. If your mortgage is $280,000, that burden doesn't disappear when income disappears. Enter existing life insurance coverage (group coverage through work counts here) and current savings. The simulator uses these to determine what resources the surviving family actually has.
Step 3: Understand the Two-Scenario Projection
The simulator projects your family's net worth year-by-year in two parallel paths: Scenario A (primary earner alive, normal income growth) and Scenario B (primary earner deceased today, insurance payout invested at your specified return, surviving on spouse income only). The chart shows both trajectories. Years where Scenario B goes negative are highlighted in red — that's the gap your insurance must fill.
Step 4: Interpret the Coverage Gap
The coverage gap is the present value of all years where Scenario B goes negative. If Scenario B runs $30,000 short in year 3 and $45,000 short in year 5, the gap accounts for both shortfalls discounted to today's dollars. The recommended coverage adds this gap to your existing coverage. For a family earning $95,000/$45,000 with $80,000 expenses and a 5-year-old, a typical recommended coverage is $600,000–$900,000 depending on debt and existing savings.
Step 5: Adjust Assumptions with Sliders
Three sliders let you stress-test your plan. Income growth rate (how quickly the primary earner's income would have grown) affects Scenario A vs B divergence. Inflation rate increases expenses over time. Payout investment return affects how quickly the insurance proceeds grow in Scenario B. Use the conservative end of the sliders (low return, high inflation) to understand the worst-case coverage needed.
FAQ
Is this life insurance simulator free?
Yes, completely free with no signup required. All calculations run locally in your browser — your financial information is never sent to any server.
How is the recommended life insurance coverage calculated?
The simulator projects your family's finances year-by-year in two scenarios: one where the primary earner is alive, and one where they have passed away. The insurance gap is the present value of all years where the surviving family's finances go negative. Recommended coverage fills that exact gap.
What inputs affect the coverage gap the most?
The biggest drivers are the primary earner's income, annual household expenses, number of years until dependents become adults, and the investment return on the insurance payout. A higher income gap (primary vs spouse income) and more years of dependency increase the recommended coverage significantly.
Should I include my mortgage in the calculation?
Yes — the simulator includes mortgage balance and other debts as immediate liabilities. When the primary earner dies, these debts still exist. The insurance payout must cover both ongoing income replacement AND these lump-sum debts to fully protect the family.
What does 'coverage gap' mean?
The coverage gap is the difference between what your family needs financially over the dependency period and what they actually have (spouse income + existing savings + existing insurance). A $500,000 coverage gap means you need $500,000 more in life insurance than you currently have.
How many years should I simulate?
The simulation runs until the youngest dependent reaches age 18 (or 22 for college planning). This is typically the period when life insurance is most critical — after dependents are adults, the coverage need often drops significantly since the household no longer needs to replace a full child-rearing income.
Does the simulation account for Social Security survivor benefits?
This simulator focuses on private financial planning. Social Security survivor benefits can reduce your coverage need — add them to the 'Existing Coverage' field or reduce expenses accordingly. SSA.gov provides estimates of survivor benefits based on your earnings record.