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Discussion Starter #1
It seems logical to use the formula (debt + liabilities - assets + replacement of current income??). for myself, i am planning to go with 5x annual salary for both me and spouse after all debts are taken care of. from work, we have another 2x annual salary but we would like to consider that as a bonus since we are not sure if future employers would do the same or if we will be employed at all...

i have 2 kids, 2 and 0. so with 5x annual salary for me and spouse, are we over or under or rightly insured?
 

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I have $1.5m of term that costs me about $100/month and wife has a little more including a policy through her work but the $1.5 costs her about $80/month.
 

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I initially purchased my policy through work when I was 23years old. At age 32 I got an autoimmune disease that resulted in me becoming uninsurable. I tried many times over the years to get additional insurance but always got turned down.

Thankfully I didn't die when my daughter was a child and I only had $100,000 in life insurance.
 

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I'm in my retirement years, so insurance is no longer much of an issue. If your mortgage and other debts are paid, do you really need 5x salary? Even with infants 2 and 0, tax-free insurance of 2 x salary should carry your spouse until they are in school, if the mortgage is paid. Of course if you are renting it's another story. But if you are trying to guarantee their financial future until adulthood maybe 5x is a good figure.

When you subtract assets, I hope you aren't subtracting assets the survivor really doesn't want to liquidate early (like RRSPs).
 

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I'm 26 and ineligible for insurance because of illnesses my parents and brother have. I have none of these issues yet cannot get insurance because of it. I'm really at a loss of what to do as I really do feel that proper insurance is one of the fundamental cornerstones that we should all have in place.
 

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If you are uninsurable your option is to self-insure. Purchased insurance should be a stopgap measure on the way to self-insurance.
 

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Currently have $500k on a 10 year (7 years left), plus 3x salary with work. Married, with two young children. Costs $40/month (th einsurance, not the wife and kids!).

I expect to have mortgage cleared in 5-6 years, and a much higher net worth then, so expect that I'll be able to cut our insurance at least in half when term is up. As MoneyGal states, self insurance should be the eventual goal.
 

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My fiancee & I each purchased $250k 20 year terms last year as initial policies to cover the cost of our mortgage + 1 year salary (for any forseeable costs).

We each have very good jobs that even working part-time would be able to handle our monthly expenses.

Once we have children (before actually) we'll take out additional policies to cover the costs of the loss in income should should one of us pass.
 

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my wife and I have a million dollar each in term insurance.

we have two kids, one is a special needs kid.

if the surviving spouse puts all the money in bonds it will cover at least a good portion of the loss in income.

as an aside, i don't have any supporting stats but i figure the probability of one of us dying while our children are young is much higher than us winning the lottery. so the way we see it, instead of buying lotto tickets, we pay for term insurance instead!

btw, it feels good to know that you are adequately covered and are sacrificing and doing what you can do to provide for your dependent children even when you're gone....
 

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MrBizi if you give me your age and your wife's age, I will calculate the probabilities of survival for each of you.

As an example, the probability that at least one a couple now aged 30 (M) and 28 (F) surviving the next 25 years is 99.8%. (M probability is 93.3 and F probability is 96.3.)
 

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Discussion Starter #12
if instead of quoting real numbers like 250k, 1mil etc, if you guys could quote the multiple of annual income, it would be more informative and a fair comparison...
 

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I have 2x salary through my work. As I'm a healthy, single, childless 30 year old, I feel that is probably more than I need. With no dependants, all I need is debt payoff and burial - which is less than 1x salary, and getting less all the time!
 

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if instead of quoting real numbers like 250k, 1mil etc, if you guys could quote the multiple of annual income, it would be more informative and a fair comparison...
I'd go with multiple of annual expense as more meaningful. I'm around 15. Maybe this is a high multiple, but term life is so cheap relative to the peace of mind it offers. I hope to be "self-insured" sooner than later, at which point I'll reduce the coverage significantly.
 

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I don't think it is as simple as saying 5x your annual salary or anything like that. You need to assess the needs of your family, and their financial obligations. An assessment of your dependants' financial vulnerabilities would give you a better idea. I would consider the dependants magnitude of exposure and the time horizon of the exposure.

From a risk perspective, once your dependants financial vulnerability disappears, there is no need for life insurance. Factor in for income taxes as well. First priority is to cover the financial liablities.
 

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I'm with Cal. There are a couple of ways to assess how much premature death insurance you want, and "multiples of income" seems to me like one of those kind of meaningless rules of thumb.

Why do you want a multiple of income? Is the intention that the surviving spouse receive the income you would have brought in for a set number of years?

However, I recognize that employer-provided group life insurance is often provided as a multiple of income, so perhaps that's where that stat comes in. But if you don't have employer-provided insurance, I don't really understand the multiples of income approach.
 

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Discussion Starter #17
I'm with Cal. There are a couple of ways to assess how much premature death insurance you want, and "multiples of income" seems to me like one of those kind of meaningless rules of thumb.

Why do you want a multiple of income? Is the intention that the surviving spouse receive the income you would have brought in for a set number of years?

However, I recognize that employer-provided group life insurance is often provided as a multiple of income, so perhaps that's where that stat comes in. But if you don't have employer-provided insurance, I don't really understand the multiples of income approach.
i agree there can be better ways to figure out the amount of coverage but the multiples of income is not totally meaningless. i believe that a person's lifestyle is generally defined by his annual income (for a salaried person of course). and most generally after certain number of years into ones career, the income does not significantly change. i do not consider a 10-20% increase due to change or role/company a significant change. and once your family is accustomed to this lifestyle, you would want to insure your life to a value that is sufficient for your family to continue this lifestyle without major hurdles.

for examples, lets take a person with an annual income of 100k. after tax and personal expense of the earning member and his retirement savings, lets say the family is used to a lifestyle of having 40k disposable income. now if this person had an insurance for 750k and were to pass away, this 500k would fetch close 40k per annum if invested at 5% rate of return. of course the example is crude since i hv not accounted for taxes but as u can see, the figures can be traced back to multiples of annual income.
 

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I agree with you perhaps more than you might think, based on my earlier message! Insurance is intended to replace the value of your human capital.

I don't totally understand the example you gave (how does insurance of $750K compare to an after-tax salary of $40K - and how did $750K become $500K in your example?).

However, as a general rule, insurance can be keyed to the discounted value of your human capital - a slightly different concept than "multiples of income."

What might that value be? Here's an interesting calculator to play around with (it's the first one at the link - I can't link to it directly).
 

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Discussion Starter #19
I don't totally understand the example you gave (how does insurance of $750K compare to an after-tax salary of $40K - and how did $750K become $500K in your example?).
it was alwasy 750k not sure y i typed 500k. sorry about that. as i mentioned 750k invested at a 5% rate of return fetches close to 40k, 37.5k to be precise...
 

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Discussion Starter #20
What might that value be? Here's an interesting calculator to play around with (it's the first one at the link - I can't link to it directly).
are u suggesting one should insure their life to the value provided by this calculator?

hmm, i guess this calculator (i am not sure how it exactly calculates) the value at the retirement age mentioned. but if u were to be deceased well before that age, you would never earn that. secondly, since the person is not living, there is no need of planning for retirement. so it would be an awesome lot of money to insure oneself for.
 
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