when determining the life insurance amount needed for a family there are many important factors to consider it is imperative to spend the appropriate time assessing the many variables involved so that a family can ensure that it will be taken care of and will not be in any sort of financial distress if a family member passes away the following are five key steps in calculating life insurance needs for the human life approach 
step one estimate the insured s remaining lifetime earnings taking into consideration both the average annual salary and potential future increases which will have a significant impact on life insurance requirements step two subtract a reasonable estimate of annual income taxes and living expenses spent on the insured this provides the actual salary needed to provide for family needs minus the presence of the insured as a rule of thumb this figure should be close to about 70 of the pre death income although this number may vary from family to family depending on individual budgets step three determine the length of time for which earnings will need to be replaced this time period could be until the insured s dependents are fully grown and no longer require financial support or until the insured s assumed retirement age step four select a discount rate for future earnings a conservative figure for this estimate would be the assumed rate of return on u s treasury bills or notes this is needed because a life insurance company will leave a death benefit in an interest bearing account step five multiply the net salary needed by the length of time needed to determine the future earnings then using the assumed rate of return figure out the present value of future earnings example of the human life approachconsider a 40 year old that makes 65 000 per year after following the above steps it is determined that the family needs 48 500 per year to support itself if the 40 year old individual passes away and must do so until what the retirement age of the individual would have been in this case 25 years away till 65 assuming a 5 discount rate the present value of this 40 year old s future net salary over 25 years would be 683 556 