Two paychecks, one household: a sheet for sizing each partner's coverage

When both partners earn, the sizing question has two answers, not one. If one partner dies, the household loses that paycheck but also stops paying that person's costs, and the survivor keeps earning. The amount that makes up the difference is rarely the same for each partner, and it is almost never equal to a round multiple of salary. This post gives you a sheet you can fill in twice, once for each partner, with a full worked example so you can check your arithmetic.

The worksheet is general information. The example households are hypothetical and the numbers are made up to show the method, not to suggest a target. A fee-only planner can refine the inputs, and the state insurance department is the place to ask about a specific company or agent.

The idea in one paragraph

For each partner, imagine they died today. Write down what the household would spend each month, subtract the costs that stop with them, add any costs that would appear (such as paying for help the person provided), and subtract the income that remains. That is the monthly gap. Multiply it by the number of years it will last, add one-time costs, and subtract money already available. The result is the extra coverage that partner needs. This is the logic of the income replacement: the 10x rule and better ways and of a needs analysis. Doing it separately for each partner is the whole trick.

The worksheet, step by step

Fill in one copy for each partner. All figures are monthly unless marked.

Step 1. Household spending today (A). Everything the household spends in a month: housing, food, transportation, childcare, utilities, health costs, personal spending, insurance premiums. Use bank statements, not memory. Do not include savings or retirement contributions in this step.

Step 2. Costs that stop if this partner dies (B). The person's personal spending, a car if it would be sold, a phone line, a share of food. Be honest, because a smaller B overstates the gap.

Step 3. Costs that continue (C = A − B).

Step 4. New costs that appear (D). Paying someone to do what the partner did: childcare, school pickups, housekeeping, elder care. This is the "replacement of services" line, and it matters most for a partner who earns less but carries more of the household's work.

Step 5. Income that remains (E). The survivor's take-home pay, regular pensions or other recurring income. Leave Social Security survivor benefits out of the base calculation so that the estimate is cautious, and ask the Social Security Administration what your family might receive; the guide Social Security survivor benefits and the $255 death payment explains who may qualify.

Step 6. Monthly gap (G = C + D − E). If the result is negative, the survivor's income covers the household and the gap is zero for that period.

Step 7. Annual gap (G × 12) and the years it lasts. If the gap changes over time, split it into stages, for example while childcare is being paid and after it ends.

Step 8. One-time costs (H). Funeral and final bills, debts you want repaid, an emergency cushion.

Step 9. Offsets (J). Group life through work, existing individual policies, savings you have earmarked for this purpose. Use only what would actually be available, and do not count retirement accounts you would not want to drain.

Step 10. Coverage needed = (annual gap × years, summed over stages) + H − J.

Because only one partner dies in each scenario, the same savings can appear on both sheets. They cannot appear twice on the same sheet.

A worked example: Taylor and Morgan

Hypothetical. Taylor and Morgan have two children, ages 4 and 7. Taylor's take-home pay is $4,800 a month and Morgan's is $3,200, so the household brings in $8,000. Monthly spending is $7,400:

Check: 2,100 + 1,100 + 700 + 1,400 + 450 + 400 + 500 + 400 + 350 = 7,400.

If Taylor died

• B (costs that stop): Taylor's personal spending of $400 plus $250 of car costs, a total of $650.
• C: $7,400 − $650 = $6,750.
• D (new costs): $300 a month for household help.
• E (remaining income): Morgan's $3,200.
• G: $6,750 + $300 − $3,200 = $3,850 a month, or $46,200 a year.

The gap does not stay constant. Childcare of $1,400 a month is expected to end in about eight years, when the younger child is 12. So the gap runs in two stages:

• Years 1 to 8: $46,200 × 8 = $369,600.
• Years 9 to 14, until the younger child is 18: the gap falls by $1,400 to $2,450 a month, or $29,400 a year. $29,400 × 6 = $176,400.
• Stage total: $369,600 + $176,400 = $546,000.

One-time costs: $12,000 for funeral and final bills plus $10,000 of debts to clear, so H = $22,000.

Offsets: Taylor's employer group life of $140,000 and $30,000 of savings earmarked for this purpose, so J = $170,000.

Coverage needed for Taylor: $546,000 + $22,000 − $170,000 = $398,000. A reasonable rounding is $400,000.

If Morgan died

• B: Morgan's personal spending of $350 plus $250 of car costs, $600.
• C: $7,400 − $600 = $6,800.
• D: Morgan handles most school pickups and household work, so help costs $600 a month.
• E: Taylor's $4,800.
• G: $6,800 + $600 − $4,800 = $2,600 a month, or $31,200 a year.

Stage one lasts eight years: $31,200 × 8 = $249,600.

After eight years the $1,400 childcare cost and the $600 of added help are both expected to end, so the gap falls by $2,000 to $600 a month, or $7,200 a year, for six more years: $7,200 × 6 = $43,200.

Stage total: $249,600 + $43,200 = $292,800. Add H = $22,000 to get $314,800.

Offsets: Morgan's employer group life of $64,000 and the same $30,000 of savings, so J = $94,000.

Coverage needed for Morgan: $314,800 − $94,000 = $220,800. Rounded, about $225,000.

What the example shows

Taylor needs almost twice what Morgan needs ($398,000 against $220,800), because Taylor's paycheck is larger and Morgan's remaining income covers less. But Morgan's need is far from trivial, even though Morgan earns less, because the household would have to buy the services Morgan provides. A rule that gave each partner coverage in proportion to salary alone would have missed that, and a rule that gave them equal amounts would have over- or under-insured both.

The method also leaves things out, which a planner can add. It ignores inflation and the investment return on a lump sum, which work in opposite directions. It ignores Social Security survivor benefits, which could reduce the need. It ignores college costs, which could increase it, and it ignores the cost of a spouse's lost retirement savings.

Your copy: fill in the blanks

Copy this onto paper or a spreadsheet and fill it in once for each partner.

1. Household spending today (A): $______ a month
2. Costs that stop if this partner dies (B): $______
3. Costs that continue (C = A − B): $______
4. New costs that appear (D): $______
5. Income that remains (E): $______
6. Monthly gap (G = C + D − E): $______
7. Stage one: $______ a year for ______ years = $______
8. Stage two: $______ a year for ______ years = $______
9. One-time costs (H): $______
10. Offsets (J): group life $______ + individual policies $______ + earmarked savings $______ = $______
11. Coverage needed: stage one + stage two + H − J = $______

Run both sheets before you collect quotes. The How much life insurance do I need? can check your totals, and the human life value calculator gives a different view, based on future earnings, for comparison.

Where each input comes from

A sheet is only as good as its inputs, and most of the work is gathering them. A few suggestions for each line.

Spending (A). Add up three months of bank and card statements and divide by three, so that an unusual month does not distort the result. Include annual costs, such as car registration or insurance premiums paid twice a year, by dividing them by twelve. Separate the lines that belong to one person from the shared ones.

Costs that stop (B). Be specific. A partner's gym membership, phone line, commute costs and clothing stop. Food, utilities and housing mostly do not. If a car payment would continue because the car would be kept, it stays in C.

New costs (D). Ask what the person actually does in a week. Cooking, school runs, appointments, yard work, caring for a relative. Price what a replacement would cost in your area, and ask yourself whether the surviving partner would pay it or absorb it by working fewer hours. Either choice is legitimate, but the sheet should say which.

Remaining income (E). Use take-home pay, not gross, since that is what pays bills. If the survivor's pay depends on a benefit that might change, such as a spouse's health coverage through that employer, note it.

Years (stages). Tie the number to events: the youngest child's eighteenth birthday, the end of a loan, a planned retirement date. A number of years chosen because it sounds right cannot be defended or revisited.

Offsets (J). Read the group life certificate rather than relying on memory. Check whether the amount shrinks at certain ages, and whether it ends if the job does. Savings count only if you have decided they are for this purpose.

A second example: no children, unequal incomes

Hypothetical. Priya and Ben have no children. Priya's take-home pay is $5,500 a month and Ben's is $2,500. They spend $6,000 a month, including a $1,800 mortgage payment. They want the survivor to have two years to decide whether to stay in the house.

If Priya died: B is her personal spending of $500, so C = $5,500. There are no new costs. E is Ben's $2,500. The monthly gap is $5,500 − $2,500 = $3,000, which is $36,000 a year. For two years: $72,000. One-time costs of $15,000 bring the total to $87,000. Priya's employer group life of $110,000 exceeds that total, so no additional coverage is needed for the transition.

If Ben died: B is his personal spending of $400, so C = $5,600. E is Priya's $5,500. The gap is $100 a month, or $1,200 a year, effectively nothing. Two years would be $2,400. With $15,000 of one-time costs the total is $17,400, which Ben's group life of $30,000 covers.

The sheet leads Priya and Ben to a clear answer. They need little or no individual coverage for the two-year transition, and what they have is the group benefit that ends with their jobs. If they later want the survivor to be able to keep the house permanently, they can add the mortgage balance to H and rerun the sheet. If they plan to start a family, they should rerun it before the birth rather than after.

The example is a reminder that the sheet can produce a small number. The goal is an accurate answer, not a large one.

Sanity checks before you buy

Once the sheet is filled in, test the answer.

1. Does each stage match a real event? A very small result for a household with young children suggests that a cost was left out. A very large one for a household with no dependents suggests that stage two was assumed to last too long. Either way, go back to the inputs rather than adjusting the answer.
2. Does the survivor's budget work? Subtract the post-death spending from the post-death income plus the benefit's annual draw. If the result is a shortfall, the numbers do not add up.
3. Is the benefit used in the right order? A benefit that pays off the mortgage reduces C for every later month. Run the sheet both ways, paying off the debt and keeping the payment, and see which is more robust.
4. Do the offsets really exist? A group benefit that ends if the survivor is laid off cannot be counted once the person has left that job. If both partners rely on employer coverage, a layoff can remove both offsets together.
5. Is the term long enough for the longest stage? A 10-year policy for a 14-year need leaves four years uncovered.

Mistakes people make on the sheet

• Using gross pay. It overstates what the household has and what it needs.
• Counting the same dollar twice, such as treating group life as an offset and also including it in savings.
• Assuming the survivor will instantly cut spending. Households adjust over months or years. Build a transition period into stage one.
• Treating the lower earner's need as zero. The services a partner provides have a price.
• Leaving the sheet in a drawer. Needs change, and a number from three years ago may not fit.

Turning the result into policies

A need that shrinks over time can be met in more than one way.

One level policy sized to the larger early need. Simple, and the benefit outlasts the need in later years. For Taylor, a $400,000 policy for 14 years.

A ladder. Two or more policies of different lengths, so that coverage steps down as the need does. Taylor might hold $250,000 for 14 years and $150,000 for 8, for a total of $400,000 in the early years and $250,000 afterward. The guide laddering term life policies to match your needs explains the structure, and the term life ladder builder lays it out. Ladders can cost less in total, but each policy has its own application, and it is more to manage.

A little extra length. Many people add a few years to the term to leave a margin, since replacing a policy at an older age is costlier. The extra premium is the price of the margin.

The post two incomes, one mortgage: which partner should carry more coverage looks at the question of which partner should carry more coverage when the household has a single mortgage.

Variations on the sheet

No children. Stage two usually disappears. The years of need may be short, such as the time to adjust or sell a home, and group coverage may already be enough.

One partner stays home. Their B is small and their D is large, because the household would pay for the work they do. That produces a sizable need on a partner with no paycheck. See life insurance for stay-at-home parents.

A survivor who could work more. If the survivor can reasonably increase their hours, E rises over time. Be cautious: that assumes health, childcare and a job market that cooperate.

A debt the household wants cleared. Put it in H. A mortgage can be treated as ongoing spending (in C) or as a one-time payoff (in H), but not both.

Reviewing the sheet

Revisit the sheet at these points:

• When a child is born or leaves home.
• After a raise, a new job or a layoff.
• When a debt is paid off or a new one added.
• When group coverage changes.
• At least once a year.

Key takeaways

• Size each partner's coverage separately: the household loses one paycheck and one set of costs, and keeps the other paycheck.
• The monthly gap equals continuing costs, plus new costs, minus the income that remains. Then multiply by the years it will last, in stages if it changes.
• The partner who earns less may still carry a large need if the household would have to buy the work they do.
• The same savings can offset the need on each partner's sheet, but not twice on one sheet. Subtract group life and existing policies.
• A declining need can be matched with a level policy, a ladder or a little extra length. Review the sheet after each major life change.