(MONEY Magazine) – The purpose of life insurance is to guarantee your family a comfortable life if you die young. Consequently you should err on the high side when calculating your coverage. That does not mean sacrificing all present niceties for the possibility of turning your relatives into Rockefellers. It does mean carrying enough protection to preserve your family's current standard of living. You can arrive at a suitable amount of coverage by using this / worksheet. If both spouses have paying jobs, make a copy of the worksheet and do the figures for each breadwinner. This exercise aims to nail down how much insurance you need while your children are growing up. It does not include the much larger sums required to finance a surviving spouse's later life or retirement. The presumption these days is that he or she could take care of that. But families with lifelong dependents -- a handicapped child, for example -- should ask a financial planner for help in their calculations. Most of the lines on the worksheet explain themselves. Here's some coaching for those that don't: Line 1. In two-paycheck households, start by lumping together both after-tax incomes. Payroll deductions for retirement funds and health insurance count as take-home pay; life insurance deductions do not. Line 2. People usually spend a third of their income on themselves. You may want to figure more or less than that. Line 6. In totaling your present assets, don't forget Individual Retirement Accounts, company savings plans and survivor's benefits from your pension fund. Lines 7 and 8. Consider here whether your spouse, if she or he is now working, would wish to stay home with the children for a year or two if you die. Then subtract that year or two from the number on line 4. If your spouse would choose not to work for several years, don't count on any take-home pay. Enter 0 on line 7. Line 10. Social Security survivor benefits can become a major source of income. Table A, at right, indicates the annual amounts currently paid to a nonworking spouse and children and the maximum available per family. Benefits decline swiftly for a working spouse earning more than $6,000 a year. Children continue collecting until they graduate from high school or turn 19, whichever comes first. A spouse's benefits expire after the youngest child reaches age 16. Estimate your total benefits by counting the years of maximum and lesser benefits at your income level in the table. Multiply the benefits by the number of years you would collect them and add the results. (For further help, call your local Social Security office or write to the Social Security Administration, Office of Public Inquiries, Baltimore, Md. 21235.) Line 14. The average annual income deficit resulting from your death (line 13) overstates what your family would need unless you adjust the amount for investment income. Much of the lump sum you are calculating could earn interest or dividends for several years before the whole amount is spent. The number shown in Table B, at left, most nearly corresponding to your annual deficit and the years your family would need income (line 4) is a factor that, when multiplied by $1,000, approximates the lump sum needed. It is based on the conservative assumption that after taxes and inflation the fund would earn a 2% return. Line 15. Enter an amount here if you want your insurance to finance the college education of your child or children. Four years at a private college, including room and board, now costs an average of $40,100, and public colleges average $22,416. For children at least five years away from college, those amounts should be adjusted now for inflation. Assuming 5% annual increases, raise them to $52,000 and $28,600 -- and in five years review them against actual costs. Line 18. Funeral and estate costs, including the settlement of debts, generally amount to one year's take-home pay. Line 19. If you wish, you can provide money that your family could use to pay off the mortgage or keep for emergencies. Line 21. Take into account any coverage you already have from your employer as well as your own policies.

1. Current total family take-home pay $-----------

2. One-third of your own take-home pay $-----------

3. Annual family expenses without you $----------- (line 1 minus line 2)

4. Number of years until your youngest child X-------- finishes high school

5. Total family expenses (line 3 times line 4) $-----------

6. Savings and investments $-----------

7. Spouse's annual take-home pay $-----------

8. Number of years of that income X--------

9. Total spouse contribution $----------- (line 7 times line 8)

10. Total Social Security benefits $-----------

11. Total assets and income (add lines 6, 9 and 10) $-----------

12. Total income deficit (line 5 minus line 11) $-----------

13. Average annual income deficit $----------- (line 12 divided by line 4)

14. Lump sum that, if invested, would provide the $----------- amount on line 13 for the number of years on line 4 (factor from Table B times $1,000)

15. College costs per child $-----------

16. Number of college-bound children X--------

17. Total college costs (line 15 times line 16) $-----------

18. Funeral and estate costs $-----------

19. Lump sum for a mortgage or emergency fund $----------- (optional)

20. Total lump sum needed at death $----------- (add lines 14, 17, 18 and 19)

21. Present life insurance coverage $-----------

22. Total insurance needed (line 20 minus line 21) $----------- (if negative, you have more than you need)

Table A: Social Security benefits. Here are estimates of annual survivor payments for your spouse and children.

WORKER'S WORKER'S 1986 INCOME PRESENT AGE OVER $20,000 $30,000 $40,000

25 Benefit per survivor $6,312 $7,764 $9,060 Maximum family benefit 14,940 18,132 21,132

35 Benefit per survivor 6,228 7,716 8,724 Maximum family benefit 14,795 18,000 20,352

45 Benefit per survivor 6,216 7,488 7,944 Maximum family benefit 14,772 17,484 18,528

55 Benefit per survivor 6,216 7,224 7,572 Maximum family benefit 14,760 16,872 17,544

65 Benefit per survivor 5,868 6,804 7,092 Maximum family benefit 13,908 15,888 16,560

Source: Social Security Administration

Table B: Lump-sum factors. Here are the amounts needed to replace income (multiply by $1,000).

DOLLAR AMOUNT NUMBER OF YEARS (FROM LINE 4) (FROM LINE 13) 5 7 9 11 13 15 16 17 18

$5,000 24 33 41 49 57 65 72 79 85

10,000 48 65 82 98 114 129 143 157 170

15,000 71 98 123 147 170 193 214 235 255

20,000 95 130 164 196 227 257 286 313 340

25,000 118 163 205 245 284 321 357 391 425

30,000 142 195 245 294 340 385 428 469 510

35,000 166 227 286 343 397 449 500 548 594

40,000 189 260 327 391 454 513 571 626 679

45,000 213 292 368 440 510 578 642 704 764

50,000 236 325 408 489 567 642 713 782 849

55,000 260 357 449 538 624 706 785 860 934

60,000 283 390 490 587 680 770 856 938 1,019

65,000 307 422 531 636 737 834 927 1,016 1,104

70,000 331 454 571 685 794 898 999 1,095 1,188

75,000 354 487 612 734 850 962 1,070 1,173 1,273