Worksheet 3

How Much Life Insurance Do I Need?

Explanation and worksheet for those who want a more accurate method.

Some people don't feel like doing the extra work and so they just want to estimate what the family's budget would be; but if you do want to get more scientific here is a suggestion on how to figure what the family's budget might be.

This worksksheet is not interactive on screen, but you are welcome to print it up and use it for your personal planning.

Anticipated monthly budget:
To figure out what the family's budget might be like if you were to die in the near future:

A. Start by figuring out what your current monthly budget is. Even if you don't track your expenses and savings per se, you hopefully have your bankbook and tax returns as a source of information. Don't forget to account for quarterly, semiannual, or annual bills or expenses that occur occasionally, such as a computer or car replacement every so many years. Divide those expenses by the appropriate factor and indicate them in your monthly budget. Also account for money you pay into a retirement account or a college fund for your children.

Current monthly budget:
$_______________

B. Once you have figured out your current monthly budget, subtract out items (except for ones that have a short life and will need to be bought again in a few years) that will be paid off in lump sums from the life insurance proceeds should you die soon, i.e., your mortgage, etc.

Minus expenses that will be paid off in a lump sum if you die:
$_______________

C. Next, subtract out or decrease the expense of items that will either no longer be expenses, or will be decreased when you are gone, i.e., your car, clothing expenses, etc.

Minus other expenses that will cease or decrease:
$_______________

D. Then figure out what new expenses the family will experience in your absence -- day care; new wardrobe of surviving spouse; benefits such as health care that had been provided through your job but now the family will have the burden of paying for it; disability insurance for surviving spouse; skills and abilities you utilize to save the family money that, in your absence your spouse would likely pay someone to do, i.e., plumbing, auto maintenance, cooking, yard work, etc.

Plus expenses that would be added or increased due to your absence:
$_______________

E. Anticipated monthly budget:
Total of (A - B - C + D)
$_______________

Expected sources of income:

F. The net (after any taxes and reductions) monthly amount the family expects to get from [social security survivor's benefit]:
Social Security $_______________

G. Will your spouse work less due to the circumstances of your children? Or would he or she work more?

Spouse's expected net income (take-home pay) after you die:
$_______________

H. Net passive income (i.e., from a trust or from rental property you own):
$_______________

I. Total expected sources of net monthly income (F+G+H):
$_______________

J. Grand Total
Total of anticipated monthly budget (from E)
$_______________

Minus the total of expected other sources of net monthly income (from I)
$_______________

Grand Total of additional net monthly income needed.
$_______________
This is the amount you would enter into the field on the calculator under "Anticipated Monthly Family Income Needs."

Back to Calculator

Probate Costs:

Property held only in your name where that property document doesn't allow for the naming of a beneficiary, as well as property transferred by means of your will, may be subject to probate and etc. may also be subject to probate. Probate costs can run 4% to 10% of the fair market value of that property, regardless of whether you have any outstanding debt against the property.

Back to Calculator

PGA Financial has no intent to generate interest in any particular life insurance company or specific life insurance policy, but rather to inform and educate you on the general concept -- after which, if you are interested, a broker at PGA Financial will be glad to research insurance companies that offer such plans and assist you in making a choice. If you do become interested and obtain a policy, the broker would be compensated by the insurance company.