Life insurance – how much is enough?

Oct, 2020

On Saturday at 7:15am, my daughter came into my room in tears asking for help. Her best friend’s father suddenly passed away. He left behind a wife and three young children. He was 45.

Later that day, I was struck by all the things facing his wife.

  • Who would take their daughter to basketball? Or the boys to hockey?
  • Who would read the kids their bedtime story?
  • Who would be there at their school plays with a huge smile?
  • How will she get by now having lost the primary income earner?

My daughter asked me, “does he have life insurance?”  It’s a good question. Money is the one thing you can control to provide peace of mind for your family should a tragic event occur.

How much is enough?
Some people say $1,000,000 is a lot of money. As a lump sum, it is, but to provide an income it may not be. Let me explain. Depending on how long you need to provide income replacement, each $1,000,000 of life insurance/liquid assets provides an income – after tax and inflation income – of….

  • $34,610/year for 40 years
  • $40,815/year for 30 years
  • $53,773/year for 20 years

In this case, let’s assume his wife requires an after tax income of $250,000/year for 40 years. She needs this to raise her family and pay for school, university, her mortgage, living expenses etc. This requires a liquid asset base/life insurance payment of $7,165,580 which would be invested to give an after tax income of $250,000/year ($310,000 before tax) for 40 years assuming a 5% rate of return before inflation (3% after inflation). After 40 years she will have no funds left.

Insurance is inexpensive

  • For a 45-year-old,$1,000,000 of 10-year term life insurance costs $80/month (male) and $54/month (female).
  • For a 55-year-old, the cost is only $230/month (male) and $155/month (female).

I often hear things like, “It will never happen to me” or “my partner/spouse will be fine, they can sell the house.”

I’ve been there after a tragic event and I can tell you they won’t be fine; they’ll miss you deeply. And they don’t want to sell the house; it would be devastating to them and the kids. Most important, despite our hopes and best laid plans, unfortunate and tragic events do happen.

When someone dies, people bring flowers, sweets and their best wishes. I deliver a much-needed cheque. My job isn’t sweet, but I ensure that the cheque is large enough to take care of your family.   Money should be the last thing that your spouse/partner and kids have to worry about.

We are here to help
If you want to revisit your insurance, click here, call Elliott or Efe at 416-222-1311 or email

Elliott Levine, MBA, CFP is the President of Levine Financial Group in Toronto
We Save Physicians Money on their Insurance

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The math:

  • Present value=$1,000,000,  1-payment a year for 40 years, 3% real rate of return (5% return less 2% for inflation), Future value=0,  Payment before tax = $43,262*80% (assumes 20% average tax rate) =$34,610/year after tax payment of capital and investment income for 40 years.
  • Payment = $310,000 before tax ($250,000 after tax (assumes 20% average tax rate)),  1-payment a year for 40 years, 3% real rate of return (after 2% inflation), Future value=0, Present value=$7,165,580