How much life insurance do I need? For most Canadian families, the answer is enough to pay off debts and the mortgage, replace several years of income and fund your children's education. Then you subtract the savings and coverage you already have. This is the DIME method, and you can work through it in about 10 minutes with a pay stub and a mortgage statement.
Below you will find a worked example, plus how group coverage and CPP benefits fit in.
What is the DIME method?
DIME stands for Debt, Income, Mortgage and Education. It is a simple way to add up what your family would need if you died. Many Canadian calculators use a version of it, including ours.
- Debt: car loans, lines of credit, credit cards and student loans. Add final expenses here too, such as a funeral and estate costs.
- Income: the yearly income your family would lose, multiplied by the number of years they would need it.
- Mortgage: the balance owing, so your family can stay in the home.
- Education: what you plan to put toward each child's post-secondary education.
Next, subtract what you already have. That includes savings and investments your family could use, plus any life insurance already in place.
Tip: Base the income line on what your family actually lives on, not your full gross salary. Planners often use 60% to 80% of gross pay, because income tax and some of your own spending would stop.
A worked example: a family of four
Here is an illustrative example. Sam is 35 and earns $90,000 a year. Sam has two children, aged 2 and 5, and a partner who works part-time. The family owes $450,000 on the mortgage and $20,000 on a car loan and a line of credit.
Because Sam's partner has some income, they choose to replace 60% of Sam's pay for 10 years. That carries the youngest child to about age 12 and gives the family time to adjust.
| DIME item | Assumption | Amount |
|---|---|---|
| Debt | Car loan and line of credit | $20,000 |
| Final expenses | Funeral and estate costs (assumption) | $25,000 |
| Income | 60% of $90,000 for 10 years | $540,000 |
| Mortgage | Balance owing | $450,000 |
| Education | $40,000 per child for 2 children (assumption) | $80,000 |
| Total needs | $1,115,000 | |
| Less savings | TFSA and other savings | −$40,000 |
| Less group life | 1× salary through work | −$90,000 |
| Coverage gap | $985,000 |
So Sam needs roughly $1 million of coverage. The 10-times-income rule would have said $900,000. That is close, but it would not show Sam why. If Sam leaves out the group coverage, the need rises to about $1,075,000.
What would that cost? In the Instasure estimate model, $1,000,000 of 20-year term for a 35-year-old non-smoking man is roughly $46 to $65 a month. That is an example profile as of October 2026. Actual prices vary by insurer, health and age. See our guide to how much life insurance costs for more examples.
How much life insurance do I need if I have group coverage at work?
Group life insurance through an employer is useful, but it has limits:
- It is often set at one or two times salary. That is usually well below a family's full need.
- It normally ends when you leave the job, retire or are laid off.
- Many plans let you convert to an individual policy for a short time after you leave. The window is often about a month, so check your benefits booklet. Converted coverage can be costly and limited.
- Optional, employee-paid group coverage may ask health questions. Its price can also rise as you age.
A practical approach is to count group coverage partly, or not at all, if you could change jobs before your needs end. Personal coverage stays with you no matter where you work. Learn more about life insurance options and term life insurance.
What about CPP survivor benefits?
If you have contributed enough to the Canada Pension Plan, your family may receive:
- A one-time CPP death benefit of $2,500.
- A monthly survivor's pension for your spouse or common-law partner.
- A monthly children's benefit for each dependent child under 18, or aged 18 to 25 and in full-time school.
The amounts depend on your contributions and your survivor's age. They help, but for most families they replace only a modest part of lost income. Quebec residents are covered by the Quebec Pension Plan, which pays similar survivor benefits.
Check current amounts and eligibility on the Government of Canada's CPP page. Many advisors treat CPP as a cushion rather than subtracting it from the coverage need.
Who may need less, or more, coverage?
DIME works well for families with children and a mortgage. Other situations call for a different approach.
| Situation | What to consider |
|---|---|
| Single, no dependants, no debts | You may need little or no coverage, apart from final expenses or co-signed debts. |
| Stay-at-home parent | Insure the cost of childcare, household help and a partner's time off work. |
| Business owner | Add business debts, a buy-sell agreement or key-person needs. See business insurance. |
| Lifelong dependant | A child with a disability may need support for life, which can call for permanent coverage. |
| Estate taxes | Tax on a cottage or investments at death is a lifelong need, often met with whole life insurance. |
Choosing a term length
Once you know the amount, match the term to how long people depend on you. A 20-year term roughly lines up with a typical mortgage and the years children are at home. Younger families often look at 25 or 30 years.
You do not have to buy one policy for one number. Your needs fall as the mortgage shrinks and the children grow up.
Tip: Laddering two policies, such as $500,000 for 20 years plus $500,000 for 10 years, can lower your total cost as your needs fall. Our term vs whole life guide explains how laddering and conversion work.
If your mortgage is your main concern, compare a personal policy with your lender's coverage in our guide to mortgage life insurance vs term life.
Next steps
- Run your own numbers in the life insurance needs calculator. It takes about two minutes and includes coverage you already have.
- Get an instant term life estimate for the amount you land on. Estimates are model-based ranges, not quotes.
- Talk to a licensed advisor in your province. They can refine the amount for taxes, CPP and your partner's income, compare insurers and help you apply.