Insurance
Coverage need
The gap between what the family would need and what it already has.
The Formula
Cover = income x years + debts + education + final - existing - savings
The gap between what the family would need and what it already has.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| I | Annual income | currency | Gross income to be replaced each year. |
| y | Years to replace | years | How long dependants need the income. |
| D | Debts | currency | Mortgage and other balances to clear. |
| E | Education fund | currency | Future schooling costs. |
| F | Final expenses | currency | Funeral and estate costs. |
| X | Existing cover | currency | Life cover already in force. |
| S | Liquid savings | currency | Cash the family could draw on. |
What Each Symbol Means
Icurrency
Annual income
Gross income to be replaced each year.
yyears
Years to replace
How long dependants need the income.
Dcurrency
Debts
Mortgage and other balances to clear.
Ecurrency
Education fund
Future schooling costs.
Fcurrency
Final expenses
Funeral and estate costs.
Xcurrency
Existing cover
Life cover already in force.
Scurrency
Liquid savings
Cash the family could draw on.
See It Worked With Real Numbers
A formula on its own does not tell you which number goes where. The how to calculate term life insurance needs page applies this equation to a concrete case, shows every intermediate step, and names the mistakes that produce a wrong answer even when the algebra is right.
Where This Formula Appears
This equation is the working core of How To Calculate Term Life Insurance Needs, filed under Finance. Every number the guide produces comes from substituting into this one line.