The Human Capital ledger is centered on the calculation of a client’s Human Capital for risk management planning. Human Capital is calculated each year of the analysis including the starting balance. This allows you to see what the Human Capital values could look like at any point in the future; this will help you when recommending an insurance approach for your clients.
Client and Spouse/Partner
The Lost Income at Death area displays the income that would be lost each year of the analysis should something happen to the client or spouse/partner. This information will be used to calculate the Human Capital value for each year and time frame.
- Employment Income – The total annual Employment Income each year of the analysis.
- CPP/OAS & Pension – The total annual CPP/QPP, Old Age Security and Pension Income each year of the analysis. Only the portion of Pension Income not covered by survivor benefits will be included.
- Other Income – The total annual income from all other sources of income each year of the analysis. Only the portion not covered by survivor benefits will be included.
- Total – Calculates the total Lost Income At Death; Employment Income + CPP/OAS & Pensions + Other Income.
The Human Capital area displays the Human Capital values each year based on different time frames. Each row of data corresponds to that point in time. For example, 3 Year Human Capital in year 5 would display the Human Capital value required to replace the income for years 5, 6, and 7. This will be calculated as a present value for those 3 years based on the investment Rate of Return.
- 1 Year – Calculates the Human Capital value for 1 year of lost income.
- 3 Year – Calculates the Human Capital value for 3 years of lost income from that point forward.
- 5 Year – Calculates the Human Capital value for 5 years of lost income from that point forward.
- 10 Year – Calculates the Human Capital value for 10 years of lost income from that point forward.
- Retirement – Calculates the Human Capital value for all years remaining until retirement from that point forward.
- Life Expectancy – Calculates the Human Capital value for all years remaining until life expectancy from that point forward.
Tangible Assets
- Liquid Assets – The total year end liquid assets. This is comprised of RRSP/RRIF, Locked-In Plans, Non-Registered, TFSA and Corporate Investments & Securities.
- Fixed Assets – The total year end personal and corporate fixed assets. This includes Personal Real Estate, Other Assets, Corporate Real Estate and Goodwill & Operations.
- Liabilities – Total outstanding mortgage debt for all personal and corporate real estate.
- Deferred Taxes – Total outstanding tax liability assuming full liquidation of all assets each year.
- Total Tangible – Calculated as Liquid Assets + Fixed Assets – Liabilities – Deferred Taxes.
Intangible Assets
- Client HC – Client Life Expectancy Human Capital values for each year of the analysis.
- Spouse HC – Spouse Life Expectancy Human Capital values for each year of the analysis.
- Total Intangible – Calculated as the total of Client HC + Spouse HC.
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