Life Insurance Calculator

by Manshu on March 27, 2011

in Insurance

In my last post about how much insurance you need – I wrote about my thoughts on how you could go about calculating your life insurance needs, and both Sumant and Hema brought out a significant limitation with the way I went about the calculation.

I was taking into account the annual expenses, expected rate of return from investment and liquid assets, but ignored liabilities completely. For someone who has taken a home loan for 15 lacs that their spouse or parent will be responsible for – that’s a pretty big miss.

Thanks to both of you for pointing that out, and I thought I’d try my hand at making a small little life insurance calculator that will take into account all these things, and then calculate a number for you.

You will need to input the annual expenses that your family will incur, input the liabilities that they will have to pay off, enter a rate at which you expect them to invest this money like 8% if you’re thinking bank FDs, enter assets that they can en-cash, and this calculator will then calculate an apt cover for you.

The way this works is that it will take the annual expense, and use the expected rate of return to see how much capital you should have to generate that much money annually. Then it will add the liability number to that, and subtract the asset number from it.

Here is the calculator – play with it and let me know what you think.

Annual Expense
Outstanding Loan
Expected Return in %
Liquid Assets

Insurance Needed

As always – feedback from you smart people is welcome, and thanks to Sumant and Hema again!

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