Protection for your family

There is no generic insurance solution that works for every families’ situation. It takes time to do a proper needs analysis for a client, and figure out the gaps in coverage that may exist.

When doing a needs analysis there are three parts to the equation that must be looked at:

1) Immediate Needs – Life insurance can protect your family from any outstanding debts that would be owing should you pass away. With a mortgage likely being the largest debt you will have, it is important to make sure that it would be taken care of, also funeral expenses, education costs, and bequests (if any) should be added as well.

2) Income – If one or both spouses are working, ensuring that an income will still be available to the surviving family members is essential. Having adequate life insurance in place, will allow the family to function with the same standard of living.

3) Assets – Any existing life insurance policies or liquid assets that could be sold will reduce the amount of life insurance needed.

To illustrate this, I will show a simple case study I have put together.

John (age 38) and Mary (age 37) are married and have 3 children all under the age of 10. They have recently just purchased a new home and their mortgage is worth $280,000. They have a few other debts outstanding (credit cards, line of credit and car loans) totaling $17,000.

John works in the engineering industry and his annual income is $85,000 and has group life insurance worth 2 times his salary. Mary works part time and makes $10,000 per year and has a personal life insurance policy worth $40,000.

After an initial meeting, John and Mary expressed they would like to have $50,000 put aside for post secondary education should either of them pass away.

Using the above information, John and Mary’s life insurance needs would be as follows:

                                                      John                                    Mary

Immediate Needs

Mortgage                                   $260,000                         $260,000

Debts                                         $17,000                             $17,000

Funeral                                     $15,000                             $15,000

Education Fund                         $50,000                            $50,000

TOTAL:                                     $ 342,000                         $342,000

Income Needs                             

Income to provide for family      $59,500                               $7,000

(70% of current income is usually used)

# of Years Income is required    20 Years                           20 Years

Annual rate of return                 5%                                      5%

TOTAL:                                      $754,443                            $88,758


Chequing Account                    $5,000                               $5,000

Life Insurance                            $170,000                           $40,000

TOTAL:                                     $175,000                           $45,000


TOTAL INSURANCE NEED:      $921,443                           $385,758