Life insurance gap methodology
How the calculator sizes your protection gap, step by step.
Demystifying the Math
Let's look under the hood. The math behind life insurance shouldn't be a black box kept by commissioned agents. Here, we outline the exact logic, formulas, and assumptions we use to calculate your baseline needs, exposing the invisible rules that govern estate liquidity and statutory baselines.
Gross Need − Existing Offsets = Net Protection Gap
Support Duration Assumptions
The DIME "I" component — how many years of income to replace — is driven by whichever dependent needs support the longest, not the sum of all of them. These are the defaults; the Visualizer and Guided Assessment both let you override them per household.
Concurrent dependents. Dependents do not queue. Everyone becomes dependent on the day you die, so support horizons are never summed — a partner needing 15 years and parents needing 8 does not mean 23 years of cover. But they are not free either: four people consume more than one. The annual requirement is therefore built year by year. Each year's need is one adult's essentials multiplied by the equivalence weight of everyone still dependent that year, using the (Hagenaars, de Vos & Zaidi, 1994; adopted by Eurostat): 1.0 for the first adult, 0.5 for each further household member aged 14 or over, 0.3 for each child under 14. That scale is an empirical standard for comparing household income across sizes, not a Philippine household-budget study — a stated assumption, not a local fact.
Why the essentials figure is per adult. If you state essentials as a share of income for your household as it stands, a two-person and a five-person household reporting the same percentage are asserting the same peso spend — and adding a dependent would then lower the per-head requirement. So the input is defined as one adult-equivalent, the 1.0 unit of the scale, and the weights build the household up from there. The Guided Assessment still asks the household-level question, because that is easier to answer honestly, and converts it. If the resulting year-one requirement exceeds your income, the tool says so rather than quietly returning a number you could never have been spending.
The household floor. As each dependent ages out the requirement steps down, but never below 60% of its year-one peak. Rent, utilities and transport are largely fixed and do not shrink when one person leaves the household. Where every remaining dependent is a child, an implicit caregiving adult is counted at the first-adult weight: a surviving 16-year-old does not run a household alone.
Income replacement. We replace your share of household income multiplied by the share that goes to essentials — not 100% of gross. Where you are the sole earner and have a surviving partner or adult sibling, the horizon is extended by 2 years to allow for their return to work. Where you are one of two earners, only 50% of the replacement income is treated as needed, because that other adult's income continues. Both are stated assumptions, adjustable in the Visualizer. Minor siblings (under 18) do not trigger this — they are supported until majority and then stop.
Nominal, undiscounted. Income replacement is summed in today's pesos with no NPV discount and no wage inflation, on the assumption the two broadly offset over a typical horizon. Education cost is the exception — it inflates at 6% a year, because the timing of that specific liability is known.
Rounding. The protection gap is the difference between gross need and offsets. Only the recommended cover is rounded up to the nearest ₱100,000, because policies are not issued to the peso. These are two different numbers and we show both.
Support is assumed to run until age 22 (through a first degree, not just legal majority at 18). A 3-year-old therefore drives a longer horizon than a 16-year-old. This is calculated per child from their actual age — not a flat number regardless of age.
Deliberately longer than the parents default below: a partner is assumed to have more remaining earning years ahead of them than a parent, who is by definition older. This is a stated assumption, not a computed fact — adjust it if your household's real situation differs.
Shorter than the partner default by design, for the reason above.
A sibling 17 or under is supported until majority (age 18). They take a child's OECD weight, and they do not get an education fund — that bucket is for your own children. A sibling 18 or over is an extra adult on the partner pattern (15 years default, same sole-earner and dual-earner rules). Count is the number of siblings you add. Siblings are never SSS or GSIS primary beneficiaries.
Live-in and same-sex partners still run the income-replacement math. Tick “not legally married” and SSS/GSIS treat the household as having no surviving spouse: the death benefit becomes the lump sum, unless you have minor children of your own. That is the statute, not a style choice.
Education Cost Assumptions
Education cost is calculated per child, from their current age — not a flat multiplier applied regardless of how far off college is or how many kids you have.
Free tuition does not mean free schooling. We assume a ₱20,000/year floor for uniforms, supplies, transport, and allowance — even at the public tier.
A child's selected annual cost tier is inflated at 6%/year for every year between their current age and age 18, then multiplied by an assumed 4-year program. A 3-year-old's education fund is therefore sized larger, in today's pesos, than a 16-year-old's — because it has 13 more years of inflation ahead of it.
A child 18 or older who's still studying is assumed to have 2 years of that cost left, at today's rate — no further inflation compounding, since that cost is already being incurred now, not in the future.
Government Statutory Baselines
Most calculators pretend SSS or GSIS don't exist. We mathematically model these benefits because they construct a baseline death pension floor that strictly reduces the private insurance capital you need to buy.
We use the official tiered formula: Max(300 + 20% AMSC + 2% AMSC(CYS−10), 40% AMSC, statutory floor), with capped at the ₱35,000 monthly salary credit ceiling and estimated from your age bracket. The result is a monthly pension, not a lump sum: a surviving legal spouse receives it for life, and each dependent child of the member receives an additional 10% (floor ₱250) until age 21, up to five children. Unmarried partners and siblings are not primary beneficiaries. We value that stream at 13 months a year over the same support horizon used for income replacement — deliberately conservative, since it stops at the horizon rather than running for the spouse's lifetime. Where there is no surviving legal spouse and no minor children, the benefit is instead the statutory 36-month lump sum. Pag-IBIG is modelled at its ₱6,000 death benefit only; the member's Total Accumulated Value is your own savings and is already counted under liquid assets.
Treated as flat baseline offsets (provident fund returns and death benefits) injected directly into your existing asset column, lowering your gross need.
Estate Settlement Mechanics
For individuals over 50 or those with significant illiquid assets (real estate, private business), the primary risk shifts from income replacement to estate liquidity under current jurisprudence.
We universally apply the baseline ₱5M standard deduction against the gross estate calculation before assessing any tax liability.
If indicated, we apply a capped secondary deduction (up to ₱10M) exclusively reserved for the primary residential property.
A flat 6% net taxation rate is algorithmically applied on the remaining corpus. This output becomes the precise target for a Whole Life policy designed solely to pay the BIR, preventing the forced fire-sale of family assets.