Shortfall against your goal
If Bill died, the household would need $98,322 more, beyond the life insurance and savings in place today, in today's dollars.
If Bill died, the $600,000 of life insurance and $135,000 of savings you have would fall $98,322 short of full protection.
Bill's $500,000 term policy ends in about 3 years. Today the gap is $98,322; if this happened 5 years from now it would be about $246,703 in that year's dollars.
If Judy died, the household would need $641,286 more, beyond the savings in place today, in today's dollars.
If Judy died, the $135,000 of savings you have would fall $641,286 short of full protection.
When an adult dies, the income they earned and the work they did at home stop. The household's costs and plans don't.
How much money the household would need if one of you died, to meet the goal you chose.
How families protect against this. Life insurance protects the people who depend on you, and the income and work at home you provide. It turns a loss no family could save for into a set monthly cost, so the home, your family's plans and daily life can continue.
If one of you died, what should the household's resources do?
We include enough to bring savings up to your emergency-fund goal.
If the household cut back, we assume it could live on 80% of take-home pay (used in “Reduce the risk” below).
Bill's take-home of $10,000 a month would stop. The household's income would drop from $10,000 to $0 a month.
Spending would stay about $9,000 a month. The debts would not be paid off, so their payments would continue until each loan ends.
The household would be short at first ($9,000 a month). After $20,000 of final costs, the $600,000 of life insurance and $135,000 of savings in place would cover that for the whole 3 years.
The $650,000 of debts would not be paid off.
Full protection goes further than getting by. It means replacing Bill's take-home of $10,000 a month for 3 years, paying off the debts and covering final costs. That is what the gap below measures.
Your goal: Support the household until the youngest child is 24 (3 years).
In place today: $600,000 of life insurance and $135,000 of cash and investments.
| + Bill's take-home pay that would stop: $10,000 a month for 3 years — the lump sum needed today to replace it | $353,121 |
| − Mortgage payment that ends when it is paid off: $5,000 a month for 3 years (the years of support you chose; the loan has 15 years left) | $173,166 |
| − Other debts payment that ends when it is paid off: $1,000 a month for 3 years (the years of support you chose; the loan has 4 years 2 months left*) | $34,633 |
| + Mortgage paid off | $600,000 |
| + Other debts paid off | $50,000 |
| + Final costs | $20,000 |
| = What full protection would take | $815,322 |
| − Life insurance in place today (including $100,000 through work) | $600,000 |
| − Savings in place: $35,000 of cash, less $18,000 kept as the emergency fund, plus $100,000 of investments | $117,000 |
| = The gap | $98,322 |
These amounts are what you'd need today, all at once. We assume the lost pay would have grown 2% a year, and that the money set aside earns 4% a year while it's paid out. A loan payment is only counted until that loan would have been paid off. We don't count retirement accounts or home equity.
* We estimated the years left on this loan from its balance and payment, leaving out interest. That makes the loan look a little shorter and the amount needed a little higher — so we err on the safe side.
Life insurance through work is counted. It usually ends when the job ends, and it is not counted from age 65.
Bill's $500,000 term life insurance ends in about 3 years. After that it won't help cover this.
If Bill died, the household would need $98,322 more, beyond the life insurance and savings in place today, in today's dollars.
This pays off the mortgage, as you chose. If you kept the mortgage and kept making the payments instead, the gap would be $222,110.
Figures in today's dollars.
| If it happened… | The gap then |
|---|---|
| Today | $98,322 |
| In 5 years | $246,703 |
| In 10 years | $139,805 |
| In 15 years (when Bill would be 70) | $0 — no gap |
These figures include future price rises. We assume costs go up 3% a year and savings keep up with prices, with nothing added. Each debt is paid down by its own payments until the loan ends. Paid household help stops when it's no longer needed. Life insurance through work stops counting at 65.
If Bill died: what the family would need vs what is in place
Judy has no paycheck, so no pay would stop: $10,000 a month would keep coming in.
Spending would stay about $9,000 a month. The debts would not be paid off, so their payments would continue until each loan ends. The household would also pay $1,500 a month for the household help Judy provides.
The household would be short at first ($500 a month). After $20,000 of final costs, the $135,000 of savings in place would cover that for the whole 3 years.
The $650,000 of debts would not be paid off.
Full protection goes further than getting by. It means paying for the help Judy provides, paying off the debts and covering final costs. That is what the gap below measures.
Your goal: Support the household until the youngest child is 24 (3 years).
In place today: no life insurance and $135,000 of cash and investments.
| + Mortgage paid off | $600,000 |
| + Other debts paid off | $50,000 |
| + Paying for the household help Judy provides ($1,500 a month for 5 years, as a lump sum needed today) | $88,286 |
| + Final costs | $20,000 |
| = What full protection would take | $758,286 |
| − Savings in place: $35,000 of cash, less $18,000 kept as the emergency fund, plus $100,000 of investments | $117,000 |
| = The gap | $641,286 |
These amounts are what you'd need today, all at once. Paid household help is counted rising 3% a year. We don't count retirement accounts or home equity.
If Judy died, the household would need $641,286 more, beyond the savings in place today, in today's dollars.
This pays off the mortgage, as you chose. If you kept the mortgage and kept making the payments instead, the gap would be $71,286.
Figures in today's dollars.
| If it happened… | The gap then |
|---|---|
| Today | $641,286 |
| In 5 years | $346,703 |
| In 10 years | $139,805 |
| In 15 years (when Bill and Judy would be 70) | $0 — no gap |
These figures include future price rises. We assume costs go up 3% a year and savings keep up with prices, with nothing added. Each debt is paid down by its own payments until the loan ends. Paid household help stops when it's no longer needed. Life insurance through work stops counting at 65.
If Judy died: what the family would need vs what is in place
Each one shows how your result would change if something were different. They are not advice about what you should do.
Try your own what-if
If Bill died 10 years from now
The gap would be about $139,805 in the dollars of that year.
Bill: keep the mortgage instead of paying it off
The gap would go up by $123,787, from $98,322 to $222,110. See it on its own
Bill: don't count life insurance through work
The gap would go up by $100,000, from $98,322 to $198,322. See it on its own
Judy: keep the mortgage instead of paying it off
The gap would go down by $570,000, from $641,286 to $71,286. See it on its own
This would make your result more accurate.
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