Since estate planning makes assumptions that you could pass away in the near future, your family could be left with a long time to survive on their own. You may want to provide  for a certain short period, or a much longer time. If you do plan on providing for a reasonably long time you may want to take into account that during certain stages your family's income could drastically change due to your spouse's earning power, change in status of Social Security eligibility, or certain expenses arising or falling off.

Thus, if you desire to make a possibly more accurate estimate you might want to segment the time into different periods, based on when changes are likely to occur, such as what would happen with Social Security benefits dropping off when your children reach age 16 or 18.

Since the First Time Period is accounted for in current (or present value) dollars, only the first calculator is necessary to figure out the amount of insurance needed for that period. For any Subsequent Time Periods that income is desired for the family you will have to enter it into the first calculator and then when it calculates the amount (which shows up in the field that says "Present Value of Income Needed") it will be necessary to take note of that amount and then go to the second calculator, which is the "Time Value Discount Calculator", and enter it in there (along with the other information it will ask for). If you would like a further explanation of how this works and why it is necessary, then please do continue on and read "How It Works" .

Let's say that you determine that if you were to pass away in the near future your family would get $2000 a month in Social Security Survivor Benefits, which would stop in 10 years, at which time your spouse would be 50 years old. So you decide the First Time Period will be 10 years, and the Second Time Period will be 15 years, for a total of 25 years at which point your spouse would be age 65 and would have plenty of retirement money, plus Social Security would kick in again. You further decide that in the First Time Period you will include a lump sum of $180,000 in the life insurance proceeds to pay off the mortgage and that your family will still require an additional $3,000 per month for other needs. Furthermore, in the Second Time Period the family will need an additional $5,000 per month (in the value of today's dollar).

So you go to the first calculator and enter in 3000 of Anticipated Monthly Family Income Needs; desired for 10 years; with a Tax Bracket of 28 [%] (which accounts for the tax on the  growth that the invested life insurance proceeds will have). You further decide on a 3 [%] Inflation Factor (so that your family can have cost of living increases); and that the invested proceeds will earn a Rate of Return of 7 [%]. (For simplicity's sake in this demonstration we will just put zeros in all of the Lump Sum fields, with the exception of the mortgage lump sum of [$] 180000.) Then you click on the Calculate button and the answers that will show are: Total Lump Sum Needs: $180,000 + Present Value of Income Needed: $326,038 = Total Life Insurance Needed: $506,038. This is the amount of life insurance that can pay off your mortgage and provide your family an income for ten years (the First Time Period), with an after tax starting salary of  $3,000 per month, and the ability to give themselves cost of living increases of up to 3% each year (i.e. $3,090 per month in the 2nd year, $3,182 per month in the 3rd year etc.). Providing, of course, that the actual rate of return the family gets is not lower than what you assumed, and/or that the actual inflation and tax rates don't end up being higher. 

Now you work on the Second Time Period. Clear the form on the first calculator and enter 5000 in the Anticipated Monthly Family Income field; Years Income Needed: 15 [years], Tax Bracket: 28 [%]; Inflation Factor -- Cost of living increase: 3 [%]; and Rate of Return: 7 [%]. Enter zeros in all the fields of the Lump Sum Needs section, and click on the Calculate button. The answer which will show is: $776,367.

Because this is a Subsequent Time Period, another step is necessary. This is where the "Time Value Discount Calculator" comes in. Take the [$] 776367 and enter it into the Subsequent Period -- Amount of Life Insurance Needed field; Years until needed: 10 [years] (please note that it not asking for the amount of years it is needed for, but rather the amount of years until it is needed); Tax Bracket: 28 [%]; Inflation Factor -- Cost of living increase: 3 [%]; and Rate of Return: 7 [%]. Click on the Calculate button and the answer is: $633,208. This is the amount of life insurance needed that will provide the 10-years-into-the-future-adjusted-for-inflation equivalent of a starting salary of $5,000 of after tax monthly income for your family for a period of 15 years (the Second Time Period), and the ability to give themselves cost of living increases of up to 3% each year. Note that it states that it will provide for the equivalent of $5,000 (of today's dollars), after tax, and adjusted for inflation. What the family could actually get at that point in the future, is a starting salary of approximately $6,757 of after tax monthly income, with the ability to give themselves cost of living increases each year of 3% (i.e. $6,960 per month in the 2nd year; $7,168 per month in the 3rd year etc.).  Providing, of course, that the actual rate of return the family gets is not lower than what you assumed, and/or that the actual inflation and tax rates don't end up being higher. 

So to sum it all up, based on the assumptions in this "How It Works" example,  you would need Life Insurance in the amount of $326,038 for income, and $180,000 for the mortgage payoff for a total of $506,038 in the First Time Period; and $633,208 for income in the Second Time Period; which is a grand total of $1,139,246 of life insurance. Of course your actual needs may be more or less, but this gives you an idea of how this more serious and more accurate planning is done, though of course even this type of planning has to use assumptions and so it is still not an exactly predictable science.