How much I need to buy and what kind of insurance?
(Niagara Falls, ON)
Hi, I am a family of 4 (my husband and I plus 2 kids 11 and 8) we have a house with value of $200.000 2 cars and mortgage of $135.000 we both work and we have $45.000 yearly income and we have life insurance up to $190,000. Also extra health insurance from work. What is the best for us to purchse based on my information we have been in canada for 5 years and my husband smokes. Thanks for your time
Life Insurance Required
Very good question to consider. The answer depends on what you want to accomplish if one of you passes away.
Ideally, you want enough money to pay off your debts, and cover your funeral. So that's $135,000 for the mortgage, plus any car loans, credit cards or other debts. And you should allow 10,000 or more for a funeral.
On top of that, you should replace lost income for a period of time. At least until the kids are adults. So say one of you dies and makes $45,000, you might want to set aside $30,000 per year for ten years. Why $30,000? Well there are no deductions from that money (unlike income) and you wouldn't need to make a mortgage payment.
So at a bare minimum,
you should probably each have $450,000 in coverage or more. More if you think that you should replace income for a longer period, or pay for your kids education, or have tax issues to consider.
As for the type of coverage, term offers the most protection for the lowest cost. But it increases in cost over time and eventually expires with no value. Having as much coverage as you can afford is important while your children are young.
For more on what type of coverage to buy, check out: Term or whole Life Insurance
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