The Short Answer
A common rule of thumb for Canadians is to carry life insurance coverage equal to 10 times your annual income plus any outstanding debts (like your mortgage). For example, a family in Calgary with a $100,000 household income and a $500,000 mortgage should aim for approximately $1.5 million in total coverage.
Table of Contents
Determining your exact coverage isn't just about picking a random number. In 2026, with inflation impacting purchasing power, under-insuring can leave your family vulnerable.
Why the "10x Income" Rule Matters
The primary purpose of life insurance is income replacement. If the primary earner passes away, your family needs to replace that lost income to maintain their standard of living, pay for education, and cover daily expenses for years to come.
Pro Tip
Consider inflation when calculating. A $100,000 income today might need $150,000 in coverage by 2046 to maintain the same purchasing power.
Step-by-Step Calculation
- Step 1: Add up your debts (Mortgage, Lines of Credit, Car Loans).
- Step 2: Calculate income replacement (Annual Income × Years needed).
- Step 3: Add future expenses (University tuition, wedding funds).
- Step 4: Subtract existing assets (Savings, existing insurance).
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Term vs. Whole Life?
For most young families, Term Life Insurance is the most affordable way to get the high coverage amount needed during these critical years. However, Whole Life Insurance offers permanent coverage with a cash value component that grows over time, making it ideal for long-term estate planning or those seeking lifelong protection with investment benefits.
