How to estimate a life insurance coverage gap
A coverage multiple is quick but opaque. A needs analysis shows what the benefit is expected to do and what resources already exist.
Read this guideEstimate a life insurance gap with this calculator
This worksheet models
Model the obligations a benefit would need to cover, then subtract resources earmarked for the same purpose.
Scenario onlyNo quote, application, or product sale
Model one person and one scenario. Use obligations and resources that belong to the same household case. Do not count an asset twice or treat this estimate as a recommendation to buy coverage.
The equation is visible
Coverage gap equals modeled obligations and transition needs minus existing coverage and resources earmarked for the same needs. If the result is below zero, the tool shows zero.
Stress-test the assumptions
Run a low, base, and high case. Do not count an asset if survivors would need it for another purpose, and verify whether employer coverage is portable.
Read the complete methodHow to model a life-insurance coverage gap
The calculator subtracts resources earmarked for survivors from the obligations and transition needs you enter. It is a scenario model, not a product recommendation.
The life insurance gap analysis explains each input and common double-counting errors. Revisit the assumptions during the annual household insurance review.
Household needs and transition costs
- Debt selected for payoff
- Income transition
- Dependent care or education
- Final and administrative costs
Resources available for those needs
- Existing coverage
- Earmarked liquid assets
- No duplicate entries
- No assets reserved elsewhere
The result is only as sound as the scenario
The tool adds stated needs and subtracts stated resources. It cannot know contract terms or family priorities that you do not enter.
- Model one person at a time.
- Avoid counting one need twice.
- Run more than one case.
Model boundary: Use the number to ask better questions, not as an automatic purchase amount.
Run more than one defensible case
- Define the household scenarioDecide whose death is being modeled and which dependents, debts, transition costs, and future needs belong in that scenario.
- Enter needs without double countingSeparate debt payoff, income transition, dependent care or education, and final or administrative costs.
- Subtract relevant resourcesCount existing coverage and liquid assets only when they are actually intended and available for the same needs.
- Run more than one caseCompare lower, base, and higher assumptions, then take unresolved contract, tax, and household questions to an appropriate professional.
What the coverage-gap number means
A positive result is the shortfall within the assumptions entered. A zero result means modeled resources met or exceeded modeled needs; it does not prove that every risk is covered.
Employer benefits, taxes, inflation, benefit timing, policy terms, and asset accessibility can change the real outcome and require separate verification.
Questions about assets, estimates, and coverage decisions
Should every asset reduce the gap?
No. Exclude assets needed for another purpose, unavailable to survivors, difficult to sell, or already counted elsewhere in the model.
Does the result tell me how much insurance to buy?
No. It is an educational estimate based on your entries, not an assessment of eligibility, product suitability, or policy structure.
Why model several scenarios?
Long-term income, care, education, and final costs are uncertain. A range exposes which assumptions have the greatest effect.