Life insurance coverage gap: Estimating a Life Insurance Coverage Gap
The coverage gap compares obligations and future goals with liquid assets and existing cover. It provides a structured starting point for discussing protection needs.
Use the Life insurance coverage gap Calculator to enter your own figures and compare the result with the worked example below.
Life insurance coverage gap formula
Gap = Obligations + future goals − liquid assets − existing coverage
Worked example
| Item | Example value |
|---|---|
| Obligations | 100000 USD |
| Future goals including income replacement capital | 500000 USD |
| Liquid assets | 50000 USD |
| Existing coverage | 200000 USD |
| Life insurance coverage gap | 350,000 USD |
These are illustrative inputs, not current prices, rates or recommended targets. Where a currency is shown, keep all comparable money amounts in the same currency; conversion examples identify the two sides separately.
How to interpret the result
Avoid counting the same need twice, particularly income replacement and future expenses. Policy eligibility, exclusions and duration require separate review.
Related calculations
Method and further reading
The example follows the FinMathly calculator method. For broader background, see CFPB: Building a budget. The background resource may use jurisdiction-specific terms; it does not replace the assumptions of this calculator.
Featured photograph: Pexels.