How much life insurance do I need in Canada?
How to calculate your coverage amount, step by step
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Key Takeaways
- Start with the gap: add your debts, final costs, children's costs and the income your family would lose, then subtract savings and coverage you already have.
- A quick benchmark from RBC Insurance is at least 5 to 7 times your yearly net income. Canada Life, citing CLHIA, reports average household protection of $442,000 (article dated May 2, 2024).
- Coverage through work can help, but it may not be enough and may not follow you if you change employers.
- The worked example is illustrative. Your own number depends on your mortgage, dependents and resources.
The short answer
Add up your debts, final costs and the income your family would lose, then subtract the savings and coverage you already have. RBC Insurance suggests at least 5 to 7 times your yearly net income as a starting point. The right figure depends on your mortgage, your children and what your family could draw on without you.
There is no single correct amount. The sections below show three ways to estimate it, a worked example you can copy, and the questions that most often change the answer.
What goes into the calculation?
GetSmarterAboutMoney.ca lists four things to weigh: how much debt you have, final expenses and any estate taxes owing at death, current and future care and education costs for your children, and the income your family relies on to keep its lifestyle. The Financial Consumer Agency of Canada adds that the death benefit is a one-time, tax-free payment your beneficiaries can use to replace income, provide for dependents, pay funeral expenses and pay off debts.
- Income your family relies on. Decide how many years of your income the policy should replace, for example until your youngest child finishes school.
- Debts. Mortgage, car loans, lines of credit and credit cards. Our page on life insurance versus mortgage insurance explains how a personal policy differs from a lender's coverage.
- Children and dependents. Childcare, post-secondary costs and any dependent adult you support.
- Final and estate costs. Funeral costs, plus probate fees and tax on capital gains when they apply. See our guide to funeral insurance and the death benefit basics.
- What you already have. Savings, investments and existing life insurance, including coverage through work.
Which method should I use to estimate my coverage?
Three approaches are common in Canada. They answer slightly different questions, so many people run two of them and compare.
| Method | How it works | Where it falls short |
|---|---|---|
| Income multiple | RBC Insurance suggests at least 5 to 7 times your yearly net income, meaning income after tax. | It ignores your actual mortgage, children and savings. |
| Needs-based | TD Insurance describes it as total financial obligations minus total savings and income your family would still have. The result is the coverage you might need. | It takes more work, and the answer moves with every assumption you make. |
| National average | Canada Life, citing the Canadian Life and Health Insurance Association, reports average protection of $442,000 per household in Canada (Canada Life article dated May 2, 2024). | It describes what households hold today, not what your family needs. |
Canada Life's own worked example combines an income multiple with specific goals: 5 times annual income, plus education savings for two children, plus the mortgage, plus final expenses. That hybrid is a sensible middle path when you want a quick number that still reflects your situation.
What does a worked example look like?
This is an illustration with round numbers we chose, not a recommendation or a quote. Replace each figure with your own.
| Step | Assumption | Amount |
|---|---|---|
| Replace income | 7 years of $60,000 net income | $420,000 |
| Mortgage balance | Paid off in full | $300,000 |
| Other debts | Car loan and line of credit | $20,000 |
| Children's education | 2 children at $30,000 each | $60,000 |
| Final expenses | Funeral and related costs | $15,000 |
| Total obligations | Sum of the five lines above | $815,000 |
| Subtract: coverage through work | Group life insurance | -$120,000 |
| Subtract: savings you would use | Savings and investments | -$50,000 |
| Coverage to consider | Total obligations minus resources | $645,000 |
Two cautions. The income line and the mortgage line can overlap, because paying off the mortgage lowers the monthly income your family needs, so an advisor can help you avoid counting the same dollars twice. And a single total hides timing: the mortgage shrinks every year, while the children's costs arrive later. Also note that if you leave your job, the $120,000 of work coverage in this example may end, and the gap grows by that amount.
How much do I need if my spouse also earns an income?
Run the calculation for each of you. TD Insurance points out that even when both spouses earn, the surviving spouse would be left to cover obligations such as the mortgage and a child's education. GetSmarterAboutMoney.ca also asks full-time caregivers to consider whether their family could afford childcare if they were gone, so a parent with no paid income may still need coverage.
Does coverage through my employer count?
It can count as an asset in your calculation, with a caveat. According to TD Insurance, employer coverage may not be enough for your family's needs, and it may not be portable: if you leave the employer you could lose it. TD Insurance suggests assessing your needs and, if needed, topping up work coverage with an individual policy. If you already hold an individual policy, keep it in force until any replacement is approved and active and you have confirmed it suits you, and talk to an advisor before you cancel anything.
How much life insurance do I need at 60 or after the kids have left home?
The same logic applies, but the list gets shorter. If your debts are paid and nobody depends on your income, you may need much less. GetSmarterAboutMoney.ca says that if you have debts or people who depend on you financially, you likely need life insurance. As an illustration, TD Insurance runs a hypothetical for a 60-year-old with five years left on a $156,000 mortgage who wants to leave something extra for grandchildren's education, and its calculator suggested $400,000.
Should I choose term or permanent coverage for the amount I calculated?
Match the coverage length to how long the need lasts. According to the Financial Consumer Agency of Canada, term insurance pays a death benefit if you die within a set period, such as 10 or 20 years, and it does not build cash value. Permanent insurance covers you for life. Term premiums are generally lower than permanent premiums when you first buy the policy.
A mortgage and young children are temporary needs, which is why many families look at term first. Emma Term lets you choose a period from 10 to 35 years, with coverage from $50,000 to $5,000,000, subject to the insurer's approval. The policy contract sets the exact terms. Read our pages on term life insurance and permanent life insurance to compare, and name the right people with our guide to choosing a beneficiary.
What changes the premium, as opposed to the coverage amount?
Your coverage amount comes from your needs. Your premium comes from the insurer's pricing. TD Insurance lists the coverage amount, sex, date of birth, health, lifestyle and type of product among the factors. For published examples, read how much life insurance costs in Canada. Those are other insurers' examples, not Emma's prices.
Frequently asked questions
How much life insurance is really necessary?
It depends on who relies on your income and what you owe. If nobody depends on you and you have no debts, you may need little more than final expenses. If you have a mortgage and children, a needs-based calculation or an income multiple will usually give a much higher number.
How do I calculate my life insurance needs quickly?
For a rough figure, multiply your yearly net income by 5 to 7, following RBC Insurance. Then compare it with the needs-based table above, which starts from your actual debts and goals. GetSmarterAboutMoney.ca notes that most insurance companies have online calculators.
Is a calculator enough?
A calculator gives an estimate, and the result depends on the answers you enter. GetSmarterAboutMoney.ca says an insurance agent can take you through a detailed analysis of how much insurance, and what types, you may need.
How much does a $1,000,000 policy cost per month?
It varies with age, sex, tobacco use, health and the length of coverage. We do not publish a single figure because premiums are set individually when you apply. Our price page shows dated examples from other insurers and explains what sets your own premium.
Can I change the amount later?
TD Insurance advises asking your insurer about changes, since options such as converting a term plan to a permanent plan can come with age or other restrictions. Review your coverage after a major life event, such as a new mortgage, a birth or a change in income.
Estimate your coverage with Emma
Emma's online tool takes you through your situation to estimate your coverage. You can also ask an advisor for help along the way.
Jacomo Deschatelets, CMO & Cofounder, Life Insurance Expert
Questions? Email us at editorial@emma.ca
Jacomo Deschatelets
Questions about this page? Email us at editorial@emma.ca
