How much life insurance do you actually need?
Rules of thumb like ten times your income are marketing, not maths. The real calculation takes about twenty minutes and produces a number specific to your household, which is usually either much higher or much lower than the rule of thumb.
Updated July 25, 2026The method
Add up everything your death would have to pay for. Subtract everything that would already be there. The difference is what you need to insure.
That is the whole method. It is sometimes called the needs approach, and it beats every multiple of income rule because it starts from your actual obligations rather than from a number that happened to be easy to say. Do it on paper. Twenty minutes.
What to add up
Debts that would need clearing
The mortgage balance, car loans, lines of credit, credit cards, and any co signed debt. Use current balances, not original amounts.
Income replacement, for a defined number of years
Take the share of household income you actually contribute, multiply by the number of years your family would need it. For a parent of a two year old, that might be sixteen years. For someone whose children are nearly independent, three. This is where most of the number comes from and where rules of thumb do the most damage.
Childcare and household costs your absence would create
Especially relevant if one parent currently provides care that would have to be bought. Cost it out at real local rates for the years it would be needed.
Education, if you intend to fund it
Post secondary costs for each child, less whatever is already in an RESP.
Final expenses
Funeral costs, probate and estate administration, and any final tax bill. On a second property or a business, the deemed disposition at death can create a capital gains liability that has to be paid in cash.
What to subtract
This half gets skipped, which is how people end up over insured and paying for it every month for twenty years.
- Existing life insurance, including any group coverage through work and through a professional association. Discount employer coverage mentally, because it usually ends with the job.
- Liquid savings and investments that would actually be available, including TFSAs and non registered accounts. Be careful with RRSPs, because they are generally taxable on death unless rolled over to a qualifying spouse or dependant.
- Your partner's income and earning capacity, realistically assessed. If they would need to reduce hours for a period, reflect that.
- Survivor benefits, including CPP survivor's pension and children's benefits, and any workplace pension survivor benefit. Get the actual figures rather than assuming.
- Assets that would be sold anyway. If the plan is to downsize, the mortgage may not need insuring in full.
The number you are left with is your coverage gap. If it is negative, you may already be adequately covered, and that is a legitimate outcome of doing this exercise honestly.
The government benefit people overestimate
For deaths occurring on or after January 1, 2025 the Canada Pension Plan death benefit consists of a basic amount of $2,500 and a possible top up of $2,500, for a maximum of $5,000. The top up requires that the deceased never received a CPP or QPP disability, post retirement disability or retirement pension, and had no surviving spouse or common law partner eligible for a survivor's pension.
Source: Government of Canada, read July 25, 2026.
Two to five thousand dollars is a contribution toward a funeral. It is not a plan. The CPP survivor's pension and children's benefits are separate, ongoing and more material, and they are worth looking up for your own contribution history rather than guessing, because they vary considerably.
For scale, CLHIA reports average life insurance protection per household in Canada of $509,000, which it notes is roughly five times household income. Whether that is the right number for you is exactly what the calculation above is for.
Free, independent help before you buy or complain
- FCAC's own life insurance guidance. Plain, neutral definitions written by a regulator with nothing to sell you. Read it before you read any insurer's page, including ours.
- The OmbudService for Life and Health Insurance. A free, impartial dispute resolution service for Canadian life and health insurance consumers. Use it after you have your insurer's final position in writing. It also helps people locate lost policies, including policies of a deceased relative.
- Your provincial insurance regulator. Advisors and agents are licensed provincially, so you can verify that the person selling to you actually holds a licence. Do this. It takes two minutes.
- Assuris. The not for profit organisation that protects Canadian policyholders if a member life and health insurer fails. Worth understanding before you worry about which company to trust.
We earn nothing from any of those. Bremo does not currently have a life insurance affiliate partner, which means there is nothing on this page we are paid for you to click, and the recommendations here are simply what we think is true.
Choosing the length, not just the amount
Having a number is only half the decision. The term you choose should be long enough to cover the period during which the need exists.
| Your situation | Typical term to consider | Reasoning |
|---|---|---|
| Young children | Long enough to reach their independence | The need ends when they can support themselves, not on a round number |
| Mortgage is the main driver | Roughly the remaining amortisation | The need falls as the balance falls |
| Both, at different horizons | Two policies, or one with a decreasing layer | Layering avoids paying for coverage after the need has ended |
| Business or estate tax liability | Permanent, if the liability is permanent | This is the case term does not solve |
FCAC's note on renewal is worth remembering when you pick a term: premiums may increase when you renew a policy, for example every five years on a five year renewable policy. Buying a term that ends before your need does means renewing at an older age, at an older age's price, and potentially after a change in health. Buy the length you need the first time.
Convertibility. A convertible term policy lets you convert to permanent coverage later without new medical evidence, up to a stated age. If there is any chance your circumstances become one of the permanent need cases, convertibility is a cheap option to hold. Ask what it can convert to and by what age, because both vary by insurer.
Common questions
Is ten times your income the right amount of life insurance?
It is a starting anchor, not an answer. It ignores whether you have a mortgage, how many years of dependency remain, what your partner earns, and what you already have through work. Two households with identical incomes can have genuinely different needs, and the calculation that captures that takes twenty minutes.
How much is the CPP death benefit in Canada?
For deaths on or after January 1, 2025 the Canada Pension Plan death benefit is a basic amount of $2,500 with a possible top up of $2,500, for a maximum of $5,000, and the top up only applies in specific circumstances. It is a one time payment to the estate or other eligible individuals and it is best thought of as a contribution toward funeral costs, not as coverage.
Should I count my group life insurance from work?
Count it, but discount it. Employer coverage generally ends when the job ends, is often a multiple of salary that falls short of a real need, and may not be portable. It is a genuine asset while you hold it and a poor foundation to build a twenty year plan on.
Do stay at home parents need life insurance?
Frequently yes, and it is the most commonly missed case. If a stay at home parent died, the surviving parent would face childcare, household and possibly reduced working hours costs that are real and often large. The absence of a salary does not mean the absence of an economic contribution.
How much life insurance does the average Canadian household have?
CLHIA reports average life insurance protection per household in Canada of $509,000, up from $483,000 in 2023, which it notes approximates five times household income. That is an average, not a recommendation, and averages are a poor guide to an individual household's actual need.
Sources
- Government of Canada, Canada Pension Plan death benefit. Source for the $2,500 basic amount, the possible $2,500 top up, and the $5,000 maximum, effective January 1, 2025.
- Canadian Life and Health Insurance Association, Canadian Life and Health Insurance Facts, 2025 Edition. Source for 2024 industry figures: 23 million Canadians holding $6 trillion of coverage, average household protection of $509,000, and $18.6 billion of life insurance benefits paid including $8.9 billion in death benefits.
- Financial Consumer Agency of Canada, Life insurance. Source for the definitions of term, whole and universal life, the tax free death benefit, and beneficiary rules. Read July 25, 2026.
- Assuris, How am I protected. Source for the protection levels if a member life insurer fails. Read July 25, 2026.
- OmbudService for Life and Health Insurance. A free, independent complaint service for Canadian life and health insurance consumers. Read July 25, 2026.
Keep reading on Bremo
Bremo does not currently have a life insurance affiliate partner, so nothing on this page pays us anything. We do earn commissions elsewhere on the site and explain exactly how in how we make money. Every figure here is verified against the source listed above, per our editorial policy. Nothing here is personal financial or insurance advice.