By Pankaj Babbar, licensed advisor at SAI Insurances · 3 min read
1-minute read
The short answer
- A simple way to estimate it: add up your debts, the income your family would need replaced, your mortgage, and future education costs.
- Then subtract what's already in place — existing life insurance and savings your family could use.
- Many people choose several years of income for the income part — often until the youngest child is independent.
- The result is a starting point, not a final answer. Your budget and goals shape the rest.
- An advisor can run the numbers with you in a short WhatsApp chat or call.
Detailed guide · 2 min read
The question behind the number
Instead of "how much coverage can I afford?", try asking: if my income stopped tomorrow, what would my family need to stay on track? That shifts the focus from the policy to the people it's for — and it's the question the method below answers.
Four things to add up
A widely used approach groups your family's needs into four buckets:
- Debts — car loans, lines of credit, credit cards, plus final expenses like a funeral.
- Income — your yearly income multiplied by the number of years your family would rely on it.
- Mortgage — the balance still owing, so your family can keep the home.
- Education — what you'd like to set aside for your children's school after high school.
Then subtract what's already there
Take away anything your family could already use: existing life insurance (including a group policy through work) and savings or investments set aside for these needs. What's left is a rough estimate of the coverage gap.
A worked example
Imagine a parent with $15,000 in car and credit debt plus a $15,000 funeral allowance, a $70,000 income their family would need for 10 years, a $300,000 mortgage, and $50,000 planned for two children's education:
- Debts and final expenses: $30,000
- Income: $70,000 × 10 = $700,000
- Mortgage: $300,000
- Education: $50,000
- Total: $1,080,000
- Minus $100,000 group life at work and $30,000 in savings = about $950,000
These numbers are made up to show the arithmetic — they're not typical figures or a recommendation.
Things the formula doesn't see
- Group coverage can disappear if you change jobs, so some people don't count all of it.
- A stay-at-home parent's work has value — childcare and running the home would cost money to replace.
- Inflation and investment returns change what a lump sum is worth over many years.
- Supporting parents — many families in Canada also help parents here or back home.
Matching the amount to the right policy
Once you have a number, the next question is how long you need it for. Needs with an end date — the mortgage, the years until the kids are independent — often fit term insurance. Lifelong needs often fit permanent coverage. Our guide to term vs. whole life explains the difference.
How we help
Send us your rough numbers for each part above and we'll work through them with you. We'll look at your full picture, compare life insurance options from multiple companies, and find coverage that fits both your family's needs and your monthly budget.
This article is general information, not insurance or financial advice. The method described gives a rough estimate only; your actual needs depend on your full financial situation, taxes and goals. Your licensed advisor can help you build a detailed needs analysis.