Insurance Needs Calculation Example:

Tom is a 35 year old married man, with 2 children. He earns $50,000 a year after taxes, and has a home with a $350,000 mortgage.  He also has a $20,000 car loan and $10,000 worth of credit card debt. Based on the formula described, here is how we would figure out how much life insurance he needs

  Assets Liabilities
Savings $15,000  
Investment Account $95,000  
Existing Life Insurance $100,000  
Income Replacement (X10)   $500,000
Mortgage   $350,000
Car Loan   $20,000
Credit Card Debt   $10,000
Funeral Expenses   $15,000
Children’s Education (X2)   $100,000
Total $210,000 $995,000

In total, Tom would require an additional $785,000 to protect his family in the event that he was to pass away.