LifePolicyFactsWhat this calculator adds up
It uses the DIME idea: Debt, Income, Mortgage and Education. Final costs are added on top, and anything you already have (existing policies, workplace cover, savings you would really use) is subtracted. The result is the gap that new cover would need to fill.
Worked example
A parent earning 60,000 who wants 10 years of income replaced, with a 250,000 mortgage, 15,000 of other debt, two children with 40,000 set aside each and 15,000 in final costs, has a total need of 960,000. With 100,000 already in place, the gap is 860,000.
Choosing the years
Ten years is a common starting point. Use the number of years until your youngest child is independent, or until your partner could reasonably be back at full earnings. Check any cover through an employer, pension or super fund, since rules differ in the US, UK, Canada and Australia.
Frequently asked questions
Should I use gross or net income?
Gross is a reasonable starting point. If you want precision, use after-tax income and a shorter period.
Does a stay-at-home parent need cover?
Often yes. Childcare, housekeeping and lost flexibility have a real cost, so enter the replacement cost in the income box.