Life insurance

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Life insurance is a contract between the insured, or owner, and a life insurance company. The owner pays a stipulated premium to the insurance company. If the insured dies while the policy is inforce a death benefit is paid to the beneficiary. Some policies accumulate cash value which is available by loan or upon surrender to the owner. Also, some policies have accelerated death benefits which may be available if the insured is expected to die within six months to a year.[1]

Determining family life insurance needs

This worksheet assumes that both spouses are working and will continue to work if one partner dies prematurely. Replacing 100% of your income may be a good starting place. This should leave the survivor with the same standard of living. Some expenses go down when one partner dies but other expenses, such as childcare, usually go up.

Family Life Insurance Needs Analysis[2]
Spouse #1 Dies Spouse #2 Dies
A. Income Need for Family
   Annual Income Needed $___________________ $___________________
   - Social Security/Fixed Benefit  ___________________  ___________________
= Income Shortage ÷ Assumed Interest Rate[note 1]  ___________________  ___________________
= Amount of Capital Needed  ___________________  ___________________
+ B. Last Expense Fund  ___________________  ___________________
+ C. Emergency Fund (3 to 6 months income)  ___________________  ___________________
+ D. Education Fund  ___________________  ___________________
= E. Total dollars needed  ___________________  ___________________
- F. Present Insurance/Assets  ___________________  ___________________
= G. New Insurance Needed $___________________ $___________________


  1. Please note that the calculation of Income Shortage, can be done in two ways. Dividing the shortage by an assumed interest rate results in the amount of capital to produce desired income indefinitely. If you prefer to provide income for a fixed period, just multiply the Income Shortage by the number of years desired.

See also


  1. Definition of life insurance by forum member mephistophles (Lee E. Marshall), a Chartered Life Underwriter (CLU)
  2. Family Needs Analysis worksheet by forum member mephistophles (Lee E. Marshall), CLU.

External links

  • Term Life Insurance Quotes (unbiased -- without entering any personal information)
  • How To Buy Life Insurance by The Finance Buff
  • The Life Insurance Course, a comprehensive free online life insurance course from This course is intended as continuing education for insurance agents.
    • The Glossary provides definitions for: Cash value life insurance, Limited Payment Life Insurance, Survivorship life insurance, Term Insurance, Universal Life Insurance, Variable Life Insurance, Variable Universal Life Insurance, and Whole life insurance. (Thus demonstrating the complexity of these products.)