Filling the Gaps: Life Insurance Calculator

Life Events

It's surprising to learn that about 85% of consumers believe life insurance is necessary, yet about 40% of consumers have no life insurance. The number one reason people give for not buying life insurance is that they think it's too expensive, but 8 in 10 of those surveyed overestimated the cost of life insurance by more than twice what it actually costs! (according to the 2015 Life Happens Insurance Barometer Study).

Why is that? Why are we so reluctant to buy life insurance for our families? And why is there such a common misconception of its actual cost?

It could be that many of us just don't know how much life insurance we need, and assume it's out of our budget. If the worst happens, that might be a costly gap.

Thankfully, there are tools to help us calculate our needs, and determine just how much life insurance we may want. One of those tools to help us manage that financial gap in our lives is right here.

Life Insurance Calculator

When you ask, "How much life insurance do I need?" what you're really wondering is, "how much money will my family need after I'm gone?"

That may seem like a daunting question to answer, with tons of variables to consider. To clear things up, let's focus on two questions:

  1. How much will they need to meet immediate obligations (things like outstanding debts, mortgage payments, college costs, grocery bills, etc.)?
  2. How much will they need to sustain their lifestyle (sustained cash flow)?

This Life Insurance Needs Calculator1 helps walk you through the process of answering these questions, to help fill that potential gap in your coverage.

Step 1: Estimating your family's expenses

The first step in determining your life insurance needs with the calculator is to help estimate your family's expenses after your passing. Here you'll enter:

Page 1 of the Life Calculator

  • An estimate of final expenses (usually about 4% of your estate value. A default value has been entered if you don’t know the value of your estate).
  • How much additional outstanding debt you have.
  • How much is left on your mortgage.
  • How many of your children still need money for college.

Step 2: Estimating the total annual income your family would need

Next, the life insurance calculator will help you think about how much your family would need to maintain their lifestyle after your passing. You'll need:

Page 2 of the Life Calculator


  • Your total annual income.
  • How many years your family would need this income.
  • Your total savings and investments (outside of retirement savings).
  • Your current retirement savings.
  • The value of any life insurance policy you currently have, including employer-provided policies.

Step 3: Including income provided by your spouse

The calculator also takes into account your spouse's contributions to the family income, if any. Here you'll enter:

Page 3 of Life Calculator


  • Your spouse's annual income.
  • Your spouse's tax rate. (For most folks, this is about 25%2).
  • How many more years your spouse plans to work.

Step 4: Other variables

For a clearer picture of how much life insurance you may actually need, and to help prevent any gaps in your coverage, the calculator also takes into account:

Page 4 of Life Calculator


  • Estimated inflation rate.
  • After-tax net investment yield.

Step 5: How much Life insurance you may want

Finally, the calculator takes into account all these variables and displays an amount of life insurance that may work for your needs.

Page 5 of Life Calculator

If you don't have life insurance, or maybe don't have enough Life insurance, it's important to recognize that gap, and speak to a Farmers agent today. Together, you can spot gaps in your coverage, and possibly prevent financial problems before they become life-altering issues.

1 This calculator is created and maintained by Life Happens at Life Access to this calculator is provided as a convenience to you. Farmers Group, Inc., its parents, subsidiaries, affiliates, including Farmers New World Life Insurance Company and Farmers Financial Solutions, LLC, and their respective officers, directors, employers, agents and representatives, shall not be responsible for your use, non-use or reliance upon these calculators, or the accuracy of your entries or records made by you. Entry and storage of any and all data is solely your responsibility. We encourage you to always maintain a duplicate copy of all your records.

As with other helpful tools, the information provided by this calculator is for illustrative purposes only and is not intended to offer any tax, legal, or financial advice. It is always a good idea to consult the appropriate professionals for advice specific to your situation.

2 IRS Procedure Bulletin Rev. Proc. 2014-61, page 5;

Your Farmers agent may only sell policies in states in which he or she is licensed.

Farmers New World Life Insurance Company is not licensed to sell life insurance, accident and health insurance, or annuities in the state of New York.

Life insurance, annuities and accidental death insurance issued by Farmers New World Life Insurance Company, 3003 77th Ave. SE, Mercer Island, WA 98040.

FFV-0716-A     07/16