Tessa and Ray are 35 years old and have a 3 year old daughter, Sophia. They want to make sure that they have sufficient life insurance in the event that one of them dies prematurely but they are concerned about the burden it may put on their already tight cash flow. The information for their capital needs analysis is summarized below.

Requirement:

1) How much insurance does Tessa need? What type of insurance would you recommend for her and why? 

2) How much insurance does Ray need? What type of insurance would you recommend for him and why?
 

Transcribed Image Text:

Immeditae Cash Available: Chequing Account Life Insurance - Work Whole life Insurance policy Total Cash Available Debts & Lump Sum Needs: Final Expenses Emergency Fund - 3 months Short-term debts If Tessa Dies - Ray Needs If Ray Dies - Tessa Needs Long-term Income Needs: $50,000 until retirement in 25 years Total long-term Income Needs $ 3,000 $150,000 $150,000 $303,000 $ 20,000 $ 36,000 $ 24,200 Mortgage (10 years remain) Education -Sophia (3 years old) Tax bill for capital gain on their family cottage $300,000 Total Debts & Lump Sum Needs $861,200 $422,000 $ 59,000 $975,000 $975,000 $3,000 $130,000 $150,000 $283,000 $ 20,000 $36,000 $ 24,200 $422,000 $ 59,000 $300,000 $861,200 $975,000 $975,000 Immeditae Cash Available: Chequing Account Life Insurance - Work Whole life Insurance policy Total Cash Available Debts & Lump Sum Needs: Final Expenses Emergency Fund - 3 months Short-term debts If Tessa Dies - Ray Needs If Ray Dies - Tessa Needs Long-term Income Needs: $50,000 until retirement in 25 years Total long-term Income Needs $ 3,000 $150,000 $150,000 $303,000 $ 20,000 $ 36,000 $ 24,200 Mortgage (10 years remain) Education -Sophia (3 years old) Tax bill for capital gain on their family cottage $300,000 Total Debts & Lump Sum Needs $861,200 $422,000 $ 59,000 $975,000 $975,000 $3,000 $130,000 $150,000 $283,000 $ 20,000 $36,000 $ 24,200 $422,000 $ 59,000 $300,000 $861,200 $975,000 $975,000

Answer rating: 100% (QA)

To determine the insurance needs for Tessa and Ray we need to calculate the amount of insurance required to cover their immediate cash needs debts and ... View the full answer