This tool estimates an average maximum coverage generally attainable based on age and income based on general industry guidelines. |
The first question to ask is How long will the proceeds last? Life insurance is designed to help one replace the assets or income stream lost from premature death. To determine how much insurance someone would want the first step would be to find out what they currently have and determine if what they have is want they want. We first need to know how much coverage they currently have in place. Then the amount of capital they have in savings and investments. We then need to determine the rate of return that the combination of the life insurance proceeds and their savings and investments will earn on an annual basis. We then must determine the income required and the impact inflation will have on those dollars being withdrawn from the pool of resources. This calculation will give us the number of years the invested dollars will potentially last. Once the client sees that number they can easily determine if the amount of coverage they have is the amount they want. This is the first step in helping someone determine the amount of coverage they want. If what they have will not accomplish what they want the price they paid to have it is meaningless. Why would one pay for anything that will not accomplish the reason for which they bought it. |
The calculation is performed as follows: Max Coverage Factor = Lookup of guideline factor based on age. See on-screen reference for current factors used. Average maximum coverage attainable = Current Income * Max Coverage Factor |