Mark, a 45-year-old self-employed graphic designer in British Columbia, wants to determine how much life insurance he needs to provide for his family for 15 years if he were to die prematurely. His current after-tax expenses are $60,000 per year, and he anticipates final expenses of $15,000 and outstanding debts of $50,000. He currently has $20,000 in an emergency fund. Using the Capital Needs Approach, how much life insurance would Mark require?

Question: Mark, a 45-year-old self-employed graphic designer in British Columbia, wants to determine how much life insurance he needs to provide for his family for 15 years if he were to die prematurely. His current after-tax expenses are $60,000 per year, and he anticipates final expenses of $15,000 and outstanding debts of $50,000. He currently has $20,000 in an emergency fund. Using the Capital Needs Approach, how much life insurance would Mark require?

Answer options:

• $945,000 ✅ $925,000
• $965,000
• $905,000

Correct answer: $925,000

Explanation: The Capital Needs Approach sums all financial obligations (income stream for dependants, final expenses, debts) and subtracts existing liquid assets. ($60,000/year * 15 years) + $15,000 (final) + $50,000 (debts) - $20,000 (assets) = $900,000 + $15,000 + $50,000 - $20,000 = $945,000 - $20,000 = $925,000.