HOW MUCH LIFE INSURANCE DO I REALLY NEED?



I was sitting down with a good buddy of mine and he asked me this question. It is a common conversation among many of my clients when shaping the risk management side of their financial plan.



Life Insurance Form
Everybody’s insurance needs are different and as you read this blog I’m hoping that I can help you understand what your need is.

I was sitting down with a good buddy of mine and he asked me this question. It is a common conversation among many of my clients when shaping the risk management side of their financial plan.


We had a pretty good talk about the ‘ins and outs’ of life insurance and at first, I wanted to title this blog “Do I really need life insurance?” (which is a whole different blog on its own), but I know the audience of this blog. You, like myself, are invested in your children’s well being and passing away can affect that tremendously. Aside from the emotional effect, there is a significant financial strain. Everybody’s insurance needs are different and as you read this blog I’m hoping that I can help you understand what your need is.


Most people have life insurance; however, most aren’t protected.

What do you mean I’m not protected? I was already approved.

You are correct and your policy is in place. However, I’m using the word ‘protected’ in the sense of protecting you and your family financially.


Many clients sit down and tell me that they want $200,000 in life insurance and I say “Great! How did you come up with that number?” The usual response is “I think that would help my family.” I agree that it would ‘help’ their family pay off a few bills and maybe even their mortgage but is that enough to survive long term? I’m sure you have seen many GoFundMe posts that say otherwise. A full analysis should be done when looking to protect what matters to you most. I wouldn’t feel comfortable just taking that order without you fully understanding your need first.


So how do we know what your need is?

Like I said at the beginning, everybody’s needs are different and whether you are a household that builds a lifestyle that requires a dual income or single income there are 4 different categories that everyone should focus on – this is what I call my L.I.F.E. needs analysis.


L – Liabilities and Loans:

According to CBCNews, in 2016 the typical Canadian owed $21,348 in consumer debt (I always knew I was above average), that does not include mortgage debt. Leaving your family with this responsibility is a huge burden if you don’t have coverage in place. If you are married or common law most of these will transfer over to your spouse to pay. If you are single, creditors will come after your estate for payment leaving less for your kids. In this category, list out everything you owe. Mortgages, credit cards, car loans, ect.

I – Income:

Regardless if you are the bread winner for the family or if you are a stay at home parent. What you do either provides income for the family or saves the family money. Without that income/saving you will need to have that income or savings replaced to maintain their current lifestyle.