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Joint first to die Term Insurance

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OK, this is fairly simple....

First of all, it is assumed you have run the combined two spouse set, running each out to a maximum age. (Hint, when doing this, set the older spouse's 'runout age' to the year the younger spouse turns 95. If she is three years younger, set his runout age to 98) Print this and set it aside as the "I don't believe in life insurance" scenario.

Step 1.   Now forget him... go to the younger spouse ('her' in this case); bringing her up by herself. i.e. leave the program and bring her up (get file) from scratch.

Here is the scenario you postulate..... "what would happen if your husband died last night?"

All you have to do is take the amount of his RSP capital and nonReg capital (if any) and add it into the wife's.

Amortize her.

There it is, her life as it would unfold without income from the main breadwinner. You could throw in a small salary to simulate her getting some extra income.

This will; especially if the couple were starting out; result in a fairly skimpy/modest ATI.

OK.... what if you had joint first-to-die insurance?.... Simple, throw in the amount of the benefit (add it to the nonreg pot) and amortize again. Repeat with different amounts of coverage until you come up with a realistic ATI.

Step 2.   Once you have fixed on the amount of the benefit, determine what the annual premium would be, go back to the original two spouse model and re-run as before with the premium in place to see the effect of the extra insurance cost. You can even simulate lapsing the insurance once retirement begins by stopping the insurance premiums.

By the way..... if you want to simulate the spouse dying, not last night, but sometime in the future; it is best to create a separate 'survivor file'.

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