How Much Life Insurance – An In-Depth Calculation

Before we jump into how to calculate how much life insurance you or your loved one might need, let’s introduce ourselves to the uninitiated. We are, and we help empower the frum community with financial literacy and tailored guidance to achieve financial stability and independence. If you haven’t already joined our free community or created your RightCapital account which we will be using below for this demonstration, check out our Getting Started page.

Additionally, keep in mind that life insurance isn’t a magic number that is easily calculated. Instead it’s a representation of protection that encompasses all aspects of your current financial picture: your goals, risk tolerance, age, etc. This article will show you how to balance all those factors in the RightCapital tool to help you figure out how much coverage you should need.

Meet the Prubirns

First, we will introduce the family that we plan to calculate life insurance for to help you get familiar with the software and the details of the family.

The software automatically factors in inflation, so while all the numbers are in today’s dollars, you can rest assured that it won’t think that when you are 70 the dollar will go as far.

Let’s meet the Prubirn family: Shvindl (27), Nita Faktisha (25), and their children: Mendel (3), Rivka (2), and Shira (0).

They have been saving in their Roth IRA since they got married 4 years ago and have saved up $26,000.

As you can see, they have many of the same types of goals you might have: planning to work until 67, spending $3,500 a month in retirement, buying a house in a few years, a regular family vacation, paying for yeshivas and seminaries, and making weddings. Scroll through these images (there are a bunch, scroll left to right) to see the details of how these goals are configured. Notice that they are paying $2,000 a month to rent a small condo/row home for the time being.

On top of all those incredible goals, the Prubirn family also budgets to spend $3,000 a month. Remember that this doesn’t include their living expenses, which is captured above with the fact that they are renting a house for $2,000/month.

Reb Shvindl is currently making $75,000 a year, while his Rebbetzin makes $30,000.

They also have a savings plan. We see that they are maxing out both IRAs and also contributing to their 401k.

We can also see that Shvindle’s employer offers a 401k match, and he is taking advantage of that!

Our Dashboard shows us in summary that our family has an 80% successful financial plan with a current net worth of 26k

Calculating Life Insurance

Now that we understand our family, we can begin to calculate life insurance. First, we want to go to our retirement analysis and start building a life insurance plan for one of the two spouses. Let’s start with Shvindl and we can leave Nita’s plan as homework. By default you only will have the “Current Plan” and the “Proposed Plan”. If you’d like to make more plans, message your account representative so they can make them for you. They can rename your proposed plan to XYZ Life Insurance Plan later if you’d like.

Let’s put that new life insurance plan on the left (for you it will be called the proposed plan), and select the current plan on the right as shown below. Then click “ACTION ITEMS”.

If you scroll down, here is what the action items menu will look like. This lets us change our plan and see how the numbers are affected. You will also notice an edit button. This lets us bring more options into this menu.

Edit Button Missing

RightCapital is currently not exposing the edit button necessary to add and remove variables to clients. Because of this, parts of the next steps regarding this menu will not be able to be actioned by you. Please message us and we will perform the relevant steps for you. Apologies for the inconvenience.

The two menu items I want to make sure we bring in right now are Shvindl’s planning horizon and Nita’s retirement age. I am also going to select the family vacation.

To simulate the scenario where one might need life insurance, I am going to lower the planning horizon for Shvindl. This tells the software that he has passed away. I will also lower Nita’s salary assuming that she is no longer able or no longer wanting to work so that she can focus on the wellbeing and emotional health of her family. I am also going to be lowering the family vacation, just for this example, assuming they will be spending less on their family vacations now. With these 3 changes, you can see that our probability of success has dropped to 0%. This is because we don’t yet have life insurance! Click the edit button to bring back the edit menu and click “Add New Items”, then “Insurance”, and then “Term Life”.

I am going to put in some basic values to see what results we get. Let’s start with a 1.5m policy with a $1,000 premium that lasts for 30 years.

Our life insurance plan is now up to 55%!

Let’s assume you want to have a 90% success rate here. Let’s tweak this until our family can be more comfortable with how prepared they are for what R”L should never happen. After fiddling around, I find that a policy of 3,000,000 is what will give us that 90%, as shown below. Another option I could have done would be to add in some other variables from the edit menu to try to lower my expected need to not need so much life insurance. For example, I could have added in the wedding goals and lowered each wedding expense by $5,000 or I could have sent to a cheaper seminary and lowered those expenses by $20,000 in my life insurance plan. I have many dozens of levers I can pull all based on what is best for my family!

Calculating Length of Term

Now that we have the coverage amount, let’s jump forward in time and see where we are holding in 30 years to see if maybe a different term, or maybe adding overlapping coverage might be helpful. When I adjust the planning horizon of Shvindl to end at age 56, which is when our proposed plan will end, our probability of success drops to 38%. This means the amount of planned savings over those 30 years wasn’t enough to not require us to need life insurance after this plan ends. We have multiple options at this point: (1) increase our savings goals so that in 30 years we won’t need life insurance (2) find an insurance provider that will offer a longer-term that covers us until the software shows we no longer need coverage (3) find an overlapping policy that will cover us enough to make this work. For the sake of this scenario, I will do number 3.

Just like we did before, let’s make a new policy. Let’s say in twenty years we buy 2m coverage that will be a 20-year-term plan.

Our age 56 date of passing shows we have 81% success and for the Prubirn family, they are happy with that.

What about after the second policy runs out? Let’s jump forward to that. We see the same confidence! Perfect, so we no longer need any life insurance policy after the second plan ends! Notably, if you scrub through the passing during the middle of the second plan you’ll see the probability jump up high into the 90s since we are approaching being financially independent without the life insurance policy, but we also still have the policy. Therefore, during those years we will have both sides working for us.


I hope this was helpful. If you want to try this yourself, make sure to get started on our start page so you can create your RightCapital account today!

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