How Much Coverage Do You Need?

Income Replacement

One of the most common reasons for life insurance is to replace lost income.

• A general guideline is seven to ten times annual income, but a personalized calculation is more accurate.
• Consider how long your family would need support — for example, until children are financially independent or until your spouse reaches retirement age.

Outstanding Debts and Liabilities

• Mortgages, car loans, student loans, and other debts should be factored into coverage.
• Insurance can provide the funds to pay these off immediately, so survivors are not left with ongoing obligations.

Future Expenses

• Education costs for children or dependents.
• Retirement income for a surviving spouse.
• Major life milestones such as weddings or first home purchases, if you want to provide for them.

Existing Assets and Benefits

• Savings, investments, registered accounts (RRSP, TFSA), pensions, and group insurance through work should all be taken into account.
• The more resources already available, the less additional insurance may be required.

Lifestyle Needs

• Consider the cost of maintaining your family's current lifestyle, including everyday expenses, childcare, and health care.
• Some families prefer to secure enough insurance to maintain the same standard of living without major changes.

Needs-based approach

Calculates coverage by adding up debts, income replacement needs, and future expenses, then subtracting available assets.

Multiple of income approach

A simpler method using a multiple (such as 7–10) of annual income. Quick to apply but less precise.

Blended approach

Uses both methods for a balanced estimate, often refined by a financial professional.