You and your spouse are in good health and have reasonably secure careers. You have opted for life insurance coverage of 4 times your salary through your employer. Only the mortgage has credit life insurance (100%).

In the event of your death, you would like your family to be covered for at least six months of living expenses while they adjust. You also wish to leave your family debt-free. You desire a "top-of the line" funeral. One of your most important financial goals involves building an education fund to cover the cost of a four-year university education for your two-year old child. Should you die, your beneficiaries would receive a lump sum payment from the Canada Pension Plan. You have to consider the probate fees and estate taxes that would have to be paid in the event of your passing.

Family Financial Information:

Annual salary $90,000 On-going living costs $60,000 Mortgage $110,000 Car loan $25,000 Student loan $8,000 Credit card balance $12,000 Estimated funeral cost $30,000 Education fund (goal) $100,000 Education fund current balance (RESP) $25,000 CPP death benefit $2,500 Probate and Estate fee estimate $30,000 Bank account balances $6,100 Mutual fund holdings $18,000 Required: Use the Family Need method based on the family financial information above to determine your life insurance needs, including any additional insurance. Explain and show your work. What would the total amount of insurance be using the Income Replacement method? (5 marks)