Table of Contents
- 10.1 Assess the family dynamics
- 10.2 Assess the employment situation
- 10.3 Assess current financial situation
- 10.4 Assess existing insurance
- 10.5 Identify client’s priorities in the event of death
10.1 Assess the family dynamics
❤️🩹 Life insurance is often about protecting the people who depend on you.
Before recommending coverage, it’s essential to understand a client’s family structure, responsibilities, and financial relationships.
💡 Key goal: Identify who would suffer financially and how much support they would need.
10.1.1 Current spouse
A spouse or common-law partner is often the primary beneficiary.
👤 The level of support needed depends on:
- Financial dependence
- Earning ability
- Caregiving responsibilities
- Lifestyle expectations
➡️ The spouse’s financial need often determines coverage size.
10.1.1.1 Dependent vs. self-sufficient
💰 Single-income household
- Surviving spouse may rely fully on the insured’s income
- May face difficulty entering workforce
- Childcare costs may increase
- Strong need for income replacement
💰 Dual-income household
- Surviving spouse may be partially or fully self-sufficient
- Coverage may focus on income gap and lifestyle maintenance
10.1.2 Support obligations to ex-spouse(s)
⚖️ A client may have legal or moral support obligations.
✔️ If support is required:
- Ex-spouse may need to be named beneficiary
- Coverage should match obligation amount
10.1.2.1 Court-ordered insurance
Some divorce or separation orders require life insurance.
📌 Purpose:
- Ensure support continues after death
- Protect former spouse from financial hardship
If silent, the ex-spouse may still claim against the estate.
10.1.3 Minor children
👶 Financially dependent children create major coverage needs.
Parents often want to:
- Maintain living standard
- Fund education
- Support until adulthood (or longer)
📌 Note:
If minors are beneficiaries, funds are held in trust until age of majority.
10.1.3.1 Current care arrangements
🏠 Stay-at-home parents also have economic value.
If a caregiver dies:
- Childcare costs rise
- Surviving parent may need reduced work hours
- Lost future earning potential must be considered
➡️ Both working and non-working parents require protection.
10.1.3.2 Child support to ex-spouse
If children from a prior relationship exist:
- Legal child support usually applies
- Ex-spouse often named beneficiary for that portion
10.1.3.3 Court-ordered insurance
Child support orders may require life insurance.
✔️ Ensures support continues after death
✔️ Protects children’s financial future
Even without a clause, claims against the estate are possible.
10.1.4 Other dependents
Some clients support extended family.
👥 Could include:
- Relatives
- Guardianship situations
- Financially dependent family members
➡️ Anyone financially supported may justify coverage.
10.1.4.1 Disabled family members
♿ Long-term care needs can be significant.
Consider:
- Lifelong support
- Medical and care costs
- Impact on estate planning
📌 Coverage may need to last decades.
10.1.4.2 Aging parents
👵👴 Many adults support elderly parents.
Support may be:
- Financial
- Physical care
- Housing or medical assistance
➡️ Insurance can ensure this support continues if the caregiver dies.
🔑 Key takeaways
✨ Family dynamics directly shape insurance needs
✨ Spouses and children often create the largest needs
✨ Legal obligations must be funded properly
✨ Caregiving roles have real financial value
✨ Extended dependents should not be overlooked
10.2 Assess the employment situation
💼 Income is often a family’s biggest financial support system.
When a person dies, that income can disappear instantly — so understanding employment and income sources is critical when planning life insurance.
👉 The goal: Ensure beneficiaries can replace lost income and maintain stability.
10.2.1 Employee
If the life insured and/or spouse are employees, several factors shape coverage needs.
10.2.1.1 Current income
💰 Start with take-home pay (after deductions):
- Income tax
- CPP/EI contributions
- Union dues
- Other payroll deductions
✔️ This reflects real spending power lost at death.
Also consider:
- Surviving spouse’s income
- Whether that income can continue
10.2.1.2 Future income potential
📈 Income often grows over time.
Needs analysis may include:
- Expected promotions
- Salary increases
- Bonuses
- Inflation adjustments
➡️ Coverage should allow flexibility to increase in future.
10.2.1.3 Job stability
🔍 Consider employment security.
If the policyholder’s job is unstable:
- Premium affordability may be a concern
- Flexible-premium products may help
If spouse’s job is unstable:
- Greater dependency risk exists
- Higher replacement coverage may be needed
10.2.1.4 Group benefits
🏥 Employment benefits may disappear at death.
Possible losses:
- Medical coverage
- Dental coverage
- Health services
- Employer-provided life insurance
✔️ Any group life benefit should be counted in total coverage planning.
10.2.2 Business owner
If the life insured is self-employed, business structure matters.
Key areas to review:
- How income flows to owner
- What happens at death
- Tax consequences
- Business continuity
10.2.2.1 Sole proprietorship
🧾 Features:
- Business income reported personally
- Business usually ends at death
- Assets face deemed disposition
✔️ Family loses business income
✔️ Assets may trigger tax consequences
10.2.2.2 Corporation
🏢 Features:
- Owner may receive salary + dividends
- Shares face deemed disposition at death
- Capital gains tax may apply
✔️ Lifetime Capital Gains Exemption may reduce tax
✔️ Corporation continues after owner’s death
✔️ Beneficiaries can inherit shares
10.2.2.3 Partnership
🤝 Features:
- Partner reports share of income personally
- Partnership interest deemed disposed at death
- Capital gains may arise
- Not eligible for LCGE
✔️ Tax impact can reduce estate value
10.2.2.4 Existing buy-sell agreement
📜 Agreements may control what happens at death.
They typically define:
- Who buys the business interest
- Purchase price or formula
- Funding method (often life insurance)
✔️ Owner cannot freely leave shares if agreement exists
✔️ Insurance ensures funds for buyout
10.2.2.5 Business income stability and amounts
📊 Consider:
- Revenue fluctuations
- Business risk
- Premium affordability
- Dividend income
- Future growth potential
✔️ Usually focus on after-tax income
✔️ Flexible-premium policies may help unstable earners
10.2.3 Retirement
🏖️ Retirement changes — but doesn’t eliminate — insurance needs.
Income replacement may end, but other needs remain.
10.2.3.1 Time to retirement
⏳ Important for planning.
If replacing income:
- Coverage often needed until retirement age
- Shorter time horizon = different strategy
10.2.3.2 Retirement income sources
💵 Review all income sources:
Possible sources:
- Employer pensions
- Defined benefit plans
- Defined contribution plans
- Annuities
- CPP benefits
- OAS benefits
- Spouse’s pensions/benefits
✔️ Survivor benefits may reduce insurance needs
✔️ Must be factored into analysis
🔑 Key takeaways
✨ Income loss is a major risk at death
✨ Focus on take-home income replacement
✨ Business owners need specialized analysis
✨ Buy-sell agreements affect planning
✨ Retirement income sources can reduce needs
✨ Flexibility is valuable when income is uncertain
10.3 Assess current financial situation
💰 Once it’s clear whose income must be replaced or supported, the next step is understanding the full financial picture.
A clear financial snapshot helps confirm:
✔️ For the policyholder
- How much cash flow is available for premiums
- Whether beneficiaries depend on funds or simply inherit assets
✔️ For the life insured
- Who needs the proceeds: estate or named beneficiaries
✔️ For the beneficiary
- Available assets
- Outstanding debts
- Current household income
- Spending vs. saving patterns
10.3.1 Assets
A proper analysis includes all property that could:
🏠 Support estate goals
💳 Carry liabilities (like mortgages)
🧾 Trigger taxes at death (deemed disposition)
Also distinguish between:
- Assets family would sell
- Assets family wants to keep (cottage, heirlooms)
✔️ Record ACB, FMV, and beneficiaries to anticipate tax impact.
10.3.1.1 Liquid assets
💧 Easy to convert to cash without loss.
Examples:
- Chequing/savings accounts
- TFSA cash balances
- Money market funds
- Short-term deposits
- Cashable GICs
📌 Uses:
- Income replacement during estate settlement
- Funeral/final expenses
- Paying taxes
- Paying debts
⚠️ Without liquidity, executors may be forced into “fire sales.”
10.3.1.2 Fixed assets
🏡 Tangible property that can be sold:
Examples:
- Real estate
- Vehicles
- Jewelry/antiques
- Valuable collectibles
✔️ May generate cash
✔️ May also trigger capital gains tax
10.3.1.3 Investment assets
📈 Wealth-building assets:
- Stocks and private shares
- Bonds
- Long-term deposits
- Mutual funds/ETFs/segregated funds
- Rental real estate
- Business interests
Important distinctions:
- Registered vs. non-registered
- RRSP/RRIF may fully taxable if no rollover applies
- Spousal rollovers can defer tax
✔️ Always track ACB and FMV
10.3.1.4 Pension entitlements
🧓 Employer pensions matter in planning.
Consider:
- Current value
- Survivor benefits
- Pre- and post-retirement provisions
✔️ These can reduce insurance needs.
10.3.1.5 Case study summary of assets
📊 Asset summaries help calculate:
- Liquidity
- Tax exposure
- Replacement needs
- Estate protection strategies
10.3.2 Debts
💳 Debts affect both cash flow and estate value.
Creditors may demand repayment at death.
If cash is insufficient → assets may be liquidated.
10.3.2.1 Mortgage
🏠 Common and significant.
Consider:
- Sole vs. joint ownership
- Lender willingness to continue mortgage
- Desire to leave home debt-free
✔️ Many choose insurance to clear mortgage.
10.3.2.2 Credit cards and lines of credit
💳 High-interest debt should be cleared quickly.
- Joint accounts may continue
- Limits may be adjusted
- LOCs tied to property must be repaid if property changes hands
10.3.2.3 Other loans
🚗 Includes:
- Car loans
- Dealer financing
- Personal loans
- Demand loans (callable anytime)
✔️ Often become payable at death.
10.3.2.4 Case study summary of liabilities
📊 Liability summaries help determine:
- Required coverage
- Debt-clearing needs
- Estate pressure points
10.3.3 Tax liability upon death
🧾 Death can trigger taxes from:
- Capital asset disposition
- Registered plan deregistration
Examples:
- Cottages
- Investment portfolios
- Collectibles
- Business interests
✔️ Spousal rollovers can defer tax
✔️ Transfers to children often trigger tax
Planning ensures:
- Taxes don’t erode estate value
- Heirs aren’t forced to sell assets
10.3.4 Current expenses
🏠 Consider how expenses change at death:
- Housing
- Transportation
- Childcare
- Food & clothing
- Savings contributions
- Lifestyle spending
✔️ Some costs disappear
✔️ Others increase (childcare, services)
10.3.5 Available cash flow
💵 Cash flow = Income − Expenses
Positive cash flow
✅ Room for premiums
✅ Room for saving
Negative cash flow
⚠️ Growing debt
⚠️ Need to adjust spending or income
✔️ Investment income can sometimes support premiums
✔️ Future earning potential also matters
🔑 Key Takeaways
✨ Financial clarity drives accurate coverage
✨ Liquidity prevents forced asset sales
✨ Debt planning protects family stability
✨ Tax exposure must be anticipated
✨ Cash flow determines affordability
10.4 Assess existing insurance
Before recommending new coverage, a strong needs analysis always reviews what is already in place.
This prevents over-insurance, gaps, or costly duplication.
10.4.1 Individual insurance
If a client already owns policies, record the following:
🔍 Policy details checklist
• Type of policy
- Term
- Term-100
- Participating whole life
- Non-participating whole life
- Universal life (UL)
• Face amount / death benefit
- Original amount
- Term: level, increasing, or decreasing
- Participating WL: dividends used for PUAs?
- UL: level, indexed, or account-value based?
• Cash surrender value (CSV)
- Current CSV and ACB
- Surrender charges?
• Policyholder
- Who owns and controls it?
- Individual vs. business ownership
• Life/lives insured
- Same as owner?
- Joint first-to-die or last-to-die?
• Term of coverage
- 5, 10, 20 years etc.
• Renewability & convertibility
- Renewable? Until what age?
- Convertible? Until what age?
• Beneficiaries
- Revocable or irrevocable?
- Split instructions clear?
- Minor beneficiary arrangements?
- Testamentary trust?
• Riders & benefits
- GIB rider
- PUA options
- Dependent/family riders
• Premiums
- Current amount
- Future renewal costs
- UL: min/max deposits
- YRT vs LCOI
- Limited pay or lifetime pay?
• Limitations/exclusions
- Travel or activity exclusions
- Accidental-only coverage limits
• Charges against benefit
- Policy loans
- Collateral use
- Assignments
10.4.2 Business insurance
If the life insured is tied to a business:
10.4.2.1 Relationship to buy-sell agreements
Insurance often funds buy-sell agreements to ensure business continuity.
- May be owned personally or by the business
- Ensures funds to buy out ownership shares
10.4.2.2 Type of policy
- Term: cost-effective for loans or short-term needs
- Permanent: useful for long-term planning and cash value access
- Key employee benefits often use permanent insurance
10.4.2.3 Ownership & premium payment
- Usually business-owned
- Cross-purchase: owners insure each other
- Split-dollar: business owns face amount, employee may own cash value portion
10.4.3 Group insurance
Evaluate all group coverage, including dependent coverage under a spouse.
10.4.3.1 Face amount questions
- Coverage amount?
- Waiting period?
- Salary-based or fixed?
- Optional increases?
- Accidental death increases?
10.4.3.2 Policyholder & membership conditions
The employer/association owns the contract.
Ask:
- Employer stability?
- Membership requirements?
- What happens if employment ends?
10.4.3.3 End date & convertibility
Many plans allow conversion when leaving.
Guidelines from the Canadian Life and Health Insurance Association suggest:
- Up to $200,000 convertible without proof
- Available at least 31 days after leaving
- Term-to-65 or yearly renewable options
(These are guidelines, not laws.)
Also confirm:
- Conversion limits
- Spousal/dependent conversion
- Post-conversion premiums
10.4.3.4 Vulnerabilities
⚠️ Group coverage risks:
- Limited amounts
- No policy control
- Employer can change/terminate plan
- Coverage tied to employment
- Conversion premiums not guaranteed
10.4.4 Government benefits
Government benefits help, but rarely cover full needs.
10.4.4.1 Canada Pension Plan (CPP) survivor benefits
Possible payments:
- Death benefit: up to $2,500 lump sum
- Survivor’s pension: varies by age & contributions
- Children’s benefit: monthly support for eligible children
Applications required — not automatic.
10.4.4.2 Québec Pension Plan (QPP)
Similar to CPP but:
- Death benefit tied to funeral costs
- Different survivor maximums
10.4.4.3 Old Age Security (OAS) survivor benefits
Allowance available for low-income survivors age 60–64.
Reduced or eliminated at higher income levels.
10.4.4.4 Workers’ Compensation benefits
Covers work-related death only.
May include:
- Funeral expenses
- Lump sum
- Monthly pensions
⚠️ Not payable for non-work deaths → cannot replace personal insurance.
🔑 Key Takeaways
✅ Always review existing coverage first
✅ Check ownership, riders, and beneficiaries carefully
✅ Group insurance is helpful but limited
✅ Government benefits are supplementary
✅ Business insurance may not protect family needs
10.5 Identify client’s priorities in the event of death
Up to this point, assessment has focused on family structure, employment, finances, and existing coverage.
This section shifts to something just as important:
👉 What truly matters to the client if death occurs?
These priorities shape how much coverage is needed and where money should go.
10.5.1 Family lifestyle 🏡
Life insurance cannot replace a person, but it can protect a family’s financial stability and lifestyle.
✔️ Coverage is based on the needs of dependants, not the life insured.
✔️ The goal is putting the right amount of money in the right hands.
Key areas to explore:
👶 Child care
- How long will children need care?
- Will the spouse return to work quickly or remain at home?
- Daycare vs. live-in nanny?
- Extra childcare costs?
👩❤️👨 Surviving spouse’s dependency
- Was the spouse financially dependent?
- Will dependency continue long-term?
- Can the spouse become self-sufficient?
- Is retraining or education needed?
🏠 Family residence
- Should the family stay in the same home?
- Should the mortgage be eliminated?
- Who handles maintenance and upkeep?
- Will outside help be required?
🌲 Cottage / heirloom property
- Are there special properties to keep in the family?
- Are funds needed to avoid forced sales for taxes or expenses?
🏢 Family business
- Will taxes on death disrupt transfer to children?
- Are funds needed to preserve the business?
10.5.2 Final expenses ⚰️
Funeral choices are personal and vary widely.
Discuss:
- Simple vs. elaborate arrangements
- Burial or mausoleum
- Cremation and memorial preferences
💡 Planning ahead prevents financial stress on loved ones.
10.5.3 Plans for future 🎯
Many families plan beyond current needs.
Possible goals:
🎓 Post-secondary education
- Rising education costs
- Partial or full support for children
💍 Weddings
- Some parents wish to fund milestone events
🏠 Home down payments
- Helping children enter the housing market
💰 Family legacies
- Lump sums for debt elimination or financial start
- Age-based distributions
❤️ Philanthropy
- Charitable giving at death
- Can support tax-efficient estate planning
🔑 Key Takeaways
✅ Identify who depends financially on the client
✅ Protect the family lifestyle, not just income
✅ Plan for final expenses to reduce burden
✅ Consider future goals and legacy wishes
✅ Align coverage with personal values and priorities
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