Comprehensive Guide
Learn more in our Insurance Guide.
How it works
A coverage gap timeline audits the life insurance you actually hold against the need your family actually has, one year at a time — because both sides move. The need side declines steadily: mortgage principal amortizes, children march toward independence, and savings compound into self-insurance, which together typically shed four to six percent of a family's need every year. The coverage side does not decline smoothly — it holds level, then falls off a cliff the day a term policy expires. The calculator walks the two curves forward and flags every year where the surviving coverage dips below the estimated need: when the gap opens, how deep the worst year is, and the cumulative dollar-years of exposure. That cliff is where ladders fail in practice. A policy bought twenty years ago was sized against a need that has since shrunk, but the surviving tiers were sized against guesses, and one misjudged expiry strands the family for a decade. The remedy the numbers point to is usually small: a modest bridge policy covering just the flagged years costs far less than oversizing everything forever. Re-run the audit whenever a policy approaches expiry, a child arrives, or the mortgage recast changes the curve.Formula
need(t) = need today x (1 - shed %)^t | coverage(t) steps down at each expiry | gap(t) = max(0, need(t) - coverage(t))
Tips
- Check the table around each expiry year — the cliff, not the average, is what strands families.
- A gap of a few years is often cheapest to close with a small new term policy, not by oversizing the ones you own.
- Re-run the audit after refinancing or recasting — the need curve bends when the mortgage does.
- Remember group life vanishes with the job; only policies you own personally survive an employer change.
- Model the need honestly downward — insuring a peak that retired years ago is expensive nostalgia.
Frequently asked questions
When does a life insurance coverage gap usually open?
Most often the day a term policy expires, because coverage falls instantly while the family need has only declined gradually. On typical inputs a twelve-year tier expiring leaves survivors short unless the remaining policies were deliberately sized to the need at that moment — which is exactly what this timeline checks.
How fast does life insurance need shrink?
Commonly four to six percent a year. Mortgage principal retires faster than people expect, children cost less each year toward independence, and liquid savings quietly become self-insurance. A need of one million dollars today may be nearer six hundred thousand a decade in, even before any policy change.
Is it normal to have multiple life insurance policies?
Yes — stacking several term policies with different end dates is standard practice among planners. Insurers simply ask about other coverage in the application. The complexity is bookkeeping: someone must track which policy ends when, and confirm the survivors still cover the need at each expiry.
What should I do if my coverage drops below my family's need?
Price a small bridge policy covering just the shortfall years rather than replacing everything. A five-hundred-thousand-dollar, fifteen-year term for a healthy forty-year-old is often cheaper than the latté budget. If health has changed, conversion rights inside the expiring policy may be the only guaranteed path.
Does group life insurance count toward my coverage?
While you hold the job, yes. But basic group coverage almost never ports when employment ends, and voluntary supplements port only at sharply higher re-rated premiums. Count it in the timeline today, but treat it as coverage with an expiry date tied to your employer, not to a contract you control.