Following to my post on my choice of a life insurance policy, I am writing today about our final choice and the reasons behind it.
Having a new mortgage, a car loan and one child to take care of (it will jump to 2 kids pretty soon!), time had come to revise our life insurance policy. Ouch! If I die tomorrow morning, my wife with be left with a ton of debt and nothing for our children’s education. This is definitely not the scenario I would like to see happening from my place in the sky. At that time, it will be to late to help my family.
What were our needs?
As we are a young family, we need a substantial amount to cover for several expenses. First, we need to be able to cover for our mortgage and other debts. I want my wife to be able to stay in our house if she wants to. Second, we need enough money to cover for future expenses such as our children’s education. I want to be able to give as many tools as possible to my kids and a good education is one of them. It is a must that they could go at any school they want. Third, as I am making a bigger salary than my wife, I want to make sure she is able to keep up with our life style and that she could take a break before going back to work.
What was our choice?
We decided to go for a term life insurance policy. This means that in 20 years, if we do not pass away, we would have paid this premium for nothing. Hopefully, we will still be alive in 20 years! And if so, I do not think that our financial position will request further insurance at this point. It gives me 20 years worth of RRSP, investment and Smith Manoeuvre to be in a good financial situation.
We selected 500K joint-first-to-die. This means that the first to die between my wife and I will trigger the payment of 500K to the surviving spouse. If we happen both to die within 45 days, our beneficiary(ies) would get 1M$.
The 500K would be used to first, pay off all debts, second produce income to meet financial requirements. We calculate that the surviving spouse would end up debt free left with 300K in cash. Combining this amount with the widow rent from the Government, the surviving spouse would get more than enough to continue living the way we used to.
We even got a bonus when we receive our confirmation. As we are non-smoker and we both have a good health condition, the insurance company bumped the policy to 568K for the same amount. It will definitely not compensate for the fact that your one and only passed away, but being insured sure relief from financial pain.
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