Estimating Life Insurance Cover
Estimate the right life insurance cover for your family using the Income Replacement Method — based on your income, expected growth and years to work.
⬇ Download the template (Excel)Life Insurance Coverage Estimation — Income Replacement Method. This template helps you estimate the right coverage using the income replacement method. It factors in your current annual income, expected income growth and how many years you plan to keep working, then produces a table of projected annual incomes and a recommended coverage amount.
Inputs required
- Current annual income — your present annual earnings.
- Expected annual growth rate — the estimated percentage increase in your income each year.
- Remaining working years — the number of years you plan to work before retirement.
- Inflation rate — a default long-term rate of 5% is used to discount future income to present value.
Output
The template calculates the present value of your projected income over your remaining working years, adjusted for both growth and inflation. The recommended life insurance coverage is shown as a figure rounded to the nearest lakh for simplicity.
Assumptions
- A fixed inflation rate of 5% is applied to discount future incomes to their present value.
- Income is projected to grow at a consistent rate each year based on the expected growth rate you provide.
- The estimate focuses exclusively on the income replacement method and does not account for additional obligations like debts, education, or other family needs.
