With the idea of comparing and contrasting different approaches to life insurance purchases, this week we’ve interviewed three of Canada’s top financial bloggers.
These folks are financially astute. They blog on Canadian financial matters, are well read and unbaised. None of them earn an income from the financial industry. They’re just regular folks who pay very close attention to their financial affairs.
First up, is Mark from MyOwnAdvisor.ca. Mark is a married 30’s something, no children.
- 1.5 times annual salary at work.
- $500,000 10 year term policy.
Mark purchased the 10 year term policy expecting that his mortgage and debts will be paid off within the 10 year timeframe. In terms of the amount, he factored in their debts, including mortgage, and added in income loss for one year. He also factored in inflation, assuming that $500,000 will be worth almost $100,000 less 10 years from now. His final step was to round up to $500,000, after determining that the cost increase in going from $250,000 to $500,000 was minimal.
Next up, is Joe from TimelessFinance.com. Joe has a spouse and a young daughter (for cute baby pictures of Joe’s daughter, follow the link through to his blog).
- $280,000 coverage at work
- $250,000 20 year term
- Spouse, $500,000 20 year term
Joe purchased the work coverage due to the low premiums (life insurance premiums through work are generally inexpensive for younger folks, but gets increasingly expensive and uncompetitive as we get older). They purchased 20 year term with the assumption that the mortgage would be gone in that timeframe. For the amounts, Joe and his spouse used 10 times their after tax income for his amount. For his spouse, they used 10 times her income plus added in another 10 years of childcare expenses to arrive at the $500,000. No insurance on their children.
Finally we have BigCanajunMan from CanajunFinances.com. This blogger and former Nortel employee is married with children and lives in Ottawa.
- $200,000 term life insurance.
- 2 times annual income with employer.
- Some survivor benefits on his pension.
- 2 times income on spouse with employer.
- $200,000 term policy on spouse.
BigCanajunMan determined his $200,000 of term insurance, both the amount and the type, as a means to offset his mortgage debt. His work coverage is simply the maximum that’s available to him through his current employer (he’s had higher amounts at other employers in the past). For his spouse, the amount is intended to simply cover increased child care costs to allow this Big Canajun man to keep working at his Big Canajun job :).
Interesting, and perhaps not surprising, that all three families have a blend of work coverage and term insurance policies intended to cover their income.
I’d like to thank Mark, Joe and BigCanajunMan for sharing their personal information so freely.