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* Notes for the calculator
- Final Expenses can be as low as $10,000 for a basic funeral
- Paying off the mortgage is one of the most important needs
- Are there loans, leases or other financial obligations or guarantees
- Having sufficient funds set aside for your children's education is one of greatest legacies you can leave. $25,000 is considered a minimum with $10,000 per year for four or five years quite common which is $50,000 per child.
- Generally I use $10,000 unless there are situations in your household that might require more.
- This is where we calculate how much additional income your spouse will require over and above what she can earn. I like to think of how much your expenses are now after tax, reduce it by the mortgage payments as the mortgage is now paid off and increase it by 25% to allow for taxes on the income. With one parent left, they may not be able to work as many hours now.
- How many years will you need this income?
- Estimate the interest you can earn on the money – 6% is optimistic today so you could change this to 5% or even 4%. You could also consider this as a rate of return as much of the income may not be interest.
- Inflation is low now. As a rule you want a 3% spread between the interest rate you get and the rate of inflation.
- Only subtract the value of RRSP's and savings that you will use for daily living expenses and education funding. You do not want to touch RRSP's as you spouse still needs a retirement fund. In fact, you might need to have additional funds to top up the RRSP as the annual contributions you were making might stop now.
The final number you get is divided between the cash needs and the income needs based on what you filled in. If it does not make sense to you, go back and change some of the assumptions above until you reach a number that makes sense to you. You can always reach our toll free number or email us and one of our life insurance brokers will contact you if you have any questions on this.
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