Insurance Coverage Gap Calculator
Identify your insurance coverage gap by comparing your assets and liabilities against current coverage.
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How to use this calculator
Your recommended life coverage equals your income replacement need plus total liabilities. The gap is the difference between what you need and what you currently have. Emergency fund gap compares your current savings to the recommended six-month buffer.
- 1
Enter your total assets and liabilities to establish your net worth baseline.
- 2
Input your annual income, the years of income protection you want, and your current life insurance coverage.
- 3
Add your monthly expenses and current emergency fund months to see your emergency fund gap alongside your life insurance gap.
Frequently asked questions
What exactly does the life insurance gap measure?
The tool adds income replacement (annual income × years to protect) to total liabilities, and treats that sum as the coverage need. The gap is that need minus your current life coverage, never below zero. With the default inputs that is 70,000 × 10 + 250,000 = 950,000, minus 100,000, giving a gap of 850,000.
Are my assets used to reduce the life gap?
No. Total assets feed only the net worth line (assets − liabilities). Savings and investments are not subtracted from the life need, so a household with large assets will still see the full income-and-debt need here.
How is the emergency fund gap calculated?
The target is fixed at 6 months of expenses. The tool multiplies monthly expenses by that 6 and subtracts monthly expenses × the months you currently hold. At 4,000 a month and 3 months held, the target is 24,000, you hold 12,000, and the gap is 12,000. A fund above 6 months simply shows no gap.
How are the “Minor”, “Significant” and “Major” labels decided?
They use the combined life and emergency gaps: zero is “Fully covered”, under 50,000 is “Minor gaps”, under 200,000 is “Significant gaps” and anything above is “Major coverage gaps”. The cut-offs are fixed amounts, not scaled to your income, so a high earner can reach “Major” more easily.
Does it cover disability, health, home or other types of insurance?
No. Despite the general name, the calculation only addresses life cover and a cash emergency fund. It does not examine disability, critical illness, health, property or liability insurance, nor does it read any actual policy.
Why are results shown with a dollar sign?
The labels are fixed to a dollar sign, but the arithmetic has no currency logic. Enter every amount in one currency and read the symbol accordingly. The adequacy thresholds of 50,000 and 200,000 are plain numbers in that same currency.
What assumptions does the income multiple make?
It assumes the full annual income is what would need replacing, for exactly the number of years you enter, with no growth, inflation, tax, or discounting of future amounts. It also ignores a surviving partner’s earnings, children’s needs and final expenses. It is a simple screen, not a financial plan.
Is the result a recommendation to buy a certain amount of cover?
No. The “Recommended life coverage” label is just the income-plus-liabilities total from the formula. It is not tailored advice, and a licensed adviser or insurer should be consulted before choosing any cover amount.
Coverage gap calculator: income-plus-liabilities life cover and a six-month cash buffer
Two gaps, one total
The calculator tests exactly two things. First it adds your income replacement need (annual income × years you want to protect) to your liabilities and compares that with the life cover you already hold. Second it compares your emergency fund, measured in months of expenses, with a built-in six-month target. The two shortfalls are added to give a total gap, and a net worth line (assets minus liabilities) is shown for reference only.
How the total gap is labelled
The total gap is placed into a band using fixed amounts, so the label does not scale with income. The table lists each band exactly as the code applies it.
| Combined gap | Label shown |
|---|---|
| 0 | Fully covered |
| Above 0 and below 50,000 | Minor gaps |
| 50,000 up to below 200,000 | Significant gaps |
| 200,000 or more | Major coverage gaps |
Worked examples
The default inputs (assets 400,000, liabilities 250,000, income 70,000 for 10 years, 100,000 of life cover, 3 months of 4,000 expenses) give a net worth of 150,000, a coverage need of 950,000, a life gap of 850,000, an emergency gap of 12,000 and a total of 862,000, labelled “Major coverage gaps”. A household with 120,000 income, 8 years protected, 300,000 liabilities, 1,500,000 of cover and 6 months of 5,000 expenses shows a need of 1,260,000, no gap in either area, and the label “Fully covered”. A third run with 50,000 income for 5 years, no liabilities, no cover and no emergency savings at 3,000 monthly gives a 250,000 life gap and 18,000 emergency gap.
Reading the net worth line
Net worth is shown beside the two gaps but never feeds into them. In the default run it is 150,000 (400,000 of assets minus 250,000 of liabilities), yet the life gap stays at 850,000. A household that holds most of its wealth in a home or retirement account can therefore see a large gap even with a positive net worth, because the tool does not judge which assets could be used.
What the formula assumes
Because assets never reduce the life need, the tool treats cover and savings as separate pots. It applies no inflation, tax or investment return to the income stream, and counts none of a partner’s earnings. Disability, health and property risks are outside its scope. Use the output as a rough screening of two numbers, and discuss real cover levels with a licensed adviser.
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Results are estimates for informational purposes only and do not constitute professional financial, medical, legal, or technical advice. Read full disclaimer →