Life Insurance Needs Worksheet
Current Cash Needs
A - Final
Expenses
This
includes probate costs, funeral expenses (funeral expenses may
be $5,000 - $10,000) and medical costs for any bills your health
policy does not cover (deductible plus any co-insurance).
B - Emergency
Funds
Some
Financial experts recommend that you have up to six months salary
for any household or personal emergency that might arise. Your
emergency fund can be larger or smaller, depending on your family's
circumstances.
C - Mortgage
Balance
It
is a good idea to select a life insurance benefit large enough
to pay off the existing mortgage balance.
D - Other
Loans
List
all your current outstanding debts (principal), such as auto
loans, personal loans, credit card balances, etc.
E - Education
- Estimated Current College Costs
Figure
the future total college expenses for your children. On average,
the current cost is $22,533 per year per child for a four year
private school, and $10,458 per year per child for a four year
in state public school (includes tuition, room, board, supply
and transportaion costs).*
Current & Long Term Cash Needs
G - Required
Monthly Income
To
determine how much monthly income you need, take 70 percent
of your annual take-home pay and divide it by 12 months.
Example: $30,000 x .70 / 12 = $1,750 of monthly income
H - Cash
Reserve Factor
Divide
the total monthly income you require by the appropriate factor
listed below. You should select the factor that corresponds
to the number of years you will need to provide monthly income
for your family. Example: If you determine that your family needs $2,500 per
month for the next 20 years, then: $2,500 / .004573 = $546,687.
This is a time-value analysis to determine future cash needs
assuming a 3 percent annual increase in inflation and a 4 percent
return on the lump sum death benefit.
No. of Years | Factor |
10 | 0.008744 |
15 | 0.005964 |
20 | 0.004573 |
25 | 0.003747 |
30 | 0.003195 |
* Source: College Board Annual Survey of Colleges, 1999
The following worksheet can help you determine how much life insurance you may need. The letters to the left on the chart correspond with the explanations on the left under Current Cash Needs.

Imperato Tax Services, Inc. - Tax Preparation & Financial Services
