6 Simple Steps of Personal Financial Management - Free Book

Q.    How Much Life Insurance should I have?

A.     That is a great question, and the answer comes with many different opinions:

Some say 10x to 20x your annual salary.  I have to agree, if you had this much coverage, your family would probably be OK, in the event of your passing.  This is a simple calculation that anyone can make.  But how much do you actually need?  If you want to determine a more precise number, we have to dig a little deeper.

A simple example:

            Funeral cost                                                  15000

            Children's Education Fund                     100000*        

            Charity/Donations                                     10000

            Mortgage                                                       275000**

            Other Debts                                                  25000

            Income Replacement (20years)             650000***

 

Total Need:                                                               1,075,000

 

Going back to the original 20x example, if this person made 50k per year x 20, that would be 1 million.  So now you can see where that thought comes from.

This is a simple example, everyone and their families are at different stages of their lives.  This doesn't include things like "leaving an inheritance, or covering estate taxes" and many other areas of concern.  As usual, this is why you should meet and work with an Insurance Advisor.

Still want to get some quotes on your own? Do that here .

*Children Education:  we suggest 10k per year of university x 5 years, that's 50k per child.  In this example we used 2 children.  This is assuming of course, that you would like to provide the entire amount needed.  If you feel you would like to only provide half the cost, then cut this number in half.

**Mortgage:  You may be saying to yourself, "but I have mortgage insurance from the bank"...  Don't get me started on Mortgage insurance... If we put a proper life insurance policy in force, it will be with the intention of cancelling the mortgage insurance soon after.  Google:  CBC Marketplace "In Denial" if you would like more information on this subject, or click this link .

***Income Replacement:  assuming the children are young, this would provide 3000 per month to the household for 20years if invested, earning an average 4% rate of return.