Life Insurance Coverage Estimation Template: Income Replacement Method

This template is designed to help estimate the appropriate life insurance coverage using the Income Replacement Method. It factors in your current annual income, anticipated growth in income, and the number of years you plan to remain employed. The template produces a table of projected annual incomes and provides a recommended life insurance coverage amount.

Inputs Required:

1. Current Annual Income: Your present annual earnings.
2. Expected Annual Growth Rate: The estimated percentage increase in your income each year.
3. Remaining Working Years: The number of years you plan to work before retirement.
4. Inflation Rate: A default long-term inflation rate of 5% is used to discount future income projections 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 presented as a rounded figure 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 provided.

The life insurance estimate focuses exclusively on the income replacement method and does not account for additional financial obligations like debts, education, or other family needs.