Deathproofing Your Income

Deathproofing your income means securing the future of your loved ones. Whether that means making sure that your kids can go to university, covering the costs of your funeral, future debts, your mortgage or covering the costs of day-to-day living, it's very important to have a plan in place that insures your livelihood. Do you have a nest egg or some sort of life insurance coverage? If not, it's time to start thinking about it.

Life insurance plans can be structured many different ways. One popular structure is to make a term life insurance policy act as replacement income upon death. This lets the policy fill the gap financially until your family is back up on its feet. Taking into consideration investment funds, inflation, a length of time and a yearly income for your family, one can calculate how much insurance coverage is needed. So that 20 years from now, in the event of your death, your family still has enough money to live comfortably.

This calculator is primarily available to help you get an idea of how much insurance coverage you'll need to replace an income source. There are a lot of other major items to be considered, like Whole Life and Universal Life tax-advantaged investments, retirement and estate preservation requirements, or whether term life insurance is even appropriate in your situation. Before making any final decisions, we highly recommend talking to an insurance specialist or financial planner.

Using the Income Replacement Calculator

Before you click Calculate, there are three things to consider that will affect your calculation:

• Annual Income of Provider: We need to know the annual income of the person you're insuring. This doesn't need to be exact, and you do not need to take inflation into account when entering this number. If you're not sure, or don't want to reveal this information, just leave this amount as $60,000.
  
  
• Percentage of Income Required: When a loved one dies, immediate costs due to funeral expenses will be high. But over time, the cost of living will decrease due to smaller cost of groceries, transportation, entertainment, and a host of other reasons. We recommend that you leave this at 80%, but if you need a larger portion of the insured's income to cover costs, you may increase or decrease this value.
  
  
• Years Funds Should Last: This is the length of time that, in the event of death, your level of income should be replaced. The default value of 20 years, for example, would mean that your level of income would be available for 20 years after your death. This amount of time is a very comfortable living span, which in many cases will reach well into the retirement of your spouse.

If you'd like to see an example of how to replace a level of income for a length of time, click the button below.