Fiscal Agents Financial Tools Life Insurance Protection Worksheet How much is enough? This three-part worksheet will help you figure out how much Life insurance will be needed at death. Part 1 - Liabilities and Cash Needs Insurance First Applicant Second Applicant How much is owing on the mortgage(s)? How much do you owe in other loans and debts? How much will the final expenses be (burial, taxes, probate lawyer fees etc.)? How much money is needed to finish children's education? (multiply the yearly expense by the remaining years of education for each child.) E.g. 7,000 x 4 years x 2 children=$56,000 Do you have dependents that require special care? If so, how much and for how long (use the same method as above)? Do you have any other cash needs (bequests, emergency fund, etc.)? Total liabilities and cash needs Part 2 - Amount of money needed to provide income Total annual income needed by family/partner Partner's annual employment income Annual CPP/QPP survivor/orphan income benefits Gross annual income available Annual income shortage/surplus Assumed rate of return (adjust for inflation, if desired) Amount of money needed to meet income shortage Total amount of money required Part 3 - Assets (usable by family / partner) Your cash assets (savings, GICs, saving bonds etc.) Retirement savings plans $ that would be considered a rollover Mutual funds, stocks and bonds How much is the principal worth Other real estate Total life insurance (group, personal, mortgage and/or credit) Business/ farm assets CPP/QPP death benefit Other assets (e.g. pension plan death benefit) Total amount available Totals Total Assets Total Liabilities Surplus / Shortfall Single Income Family Income Objectives Based on a Government Study *, the following are typical objectives in order to permit a family to "maintain their standard of living" after the death of an income earner. Assumption is that the mortgage an residence is paid or that rent has been established and that education expenses are provided for separately. A government study has found that two-income households outspend their one-earner counterparts. Therefore, if both spouses are presently working, 70% of their Total Gross Income should be provided regardless of Income Level. Annual Gross Income % of Gross Income Required up to $44,000 70% $44,001 - $49,000 66% $49,001 - $54,000 63% $54,001 - $60,000 60% Over $60,000 57% * Source: 1960 bureau of Labor Statistic Consumer Expenditures Survey Updated with Bureau of labor Statistic Price Index through August 1995, and converted to Canadian dollar values using Statistics Canada purchasing power parity data (1994). Income Objective Table Money required to provide levels of annual/monthly income at various interest rates ( simple interest) Annual Income $ Monthly Income $ 4% 6% 8% 10% 12,000 1,000 300,000 200,000 150,000 120,000 15,000 1,250 375,000 250,000 187,000 150,000 18,000 1,500 450,000 300,000 225,000 180,000 21,000 1,750 525,000 350,000 262,500 210,000 24,000 2,000 600,000 400,000 300,000 240,000 27,000 2,250 675,000 450,000 337,500 270,000 30,000 2,500 750,000 500,000 375,000 300,000 33,000 2,275 825,000 550,000 412,500 330,000 36,000 3,000 900,000 600,000 450,000 360,000 39,000 3,250 975,000 650,000 486,500 390,000 42,000 3,500 1,050,000 700,000 487,500 420,000 45,000 3,750 1,125,000 750,000 525,000 450,000 48,000 4,000 1,200,000 800,000 562,500 480,000 51,000 4,250 1,250,000 850,000 600,000 510,000 54,000 4,500 1,350,000 900,000 637,500 540,000 57,000 4,750 1,425,000 950,000 712,500 570,000 60,000 5,000 1,500,000 1,000,000 750,000 600,000 Note: The lower interest rates are used if a person wishes to include an offset for inflation: e.g. 8% interest, 4% use 4% interest rate.