Case: John and Linda

John and Linda are in their $40$s and live in Markham, ON$.$ Both are employed and earning good incomes. They have one child attending university. Each month, after contributing to their RRSPs and TFSAs, they spend most of what is left.

John earns $$128,000$ a year. His employer's group insurance plan provides full benefits, including disability income insurance. Linda earns $$52,000$ per year but her employer does not provide benefits. After$-$tax, her income is $$38,000.$

When considering their lifestyle expenditures, net worth and all the other factors in their financial situation, John and Linda conclude that their greatest risk exposure lies with Linda's income stream. If she became disabled and unable to work for any length of time, they would not be able to maintain their standard of living.

They would like your advice on how to address this risk.

What is John and Linda's risk management objective?

Identify the type of risk.

Evaluate the risk.

For each quadrant of the matrix, recommend one strategy that would manage their identified risk.

Risk Evaluation Matrix