One of the most common questions people have when buying life insurance is: “How much coverage do I actually need?” The right answer is different for everyone, but there are some simple ways to figure out a number that makes sense for you and your loved ones.
Start with the DIME Method
This popular formula breaks it down into four key areas:
- Debt: What do you owe (mortgage, car loan, credit cards, etc.)?
- Income: Multiply your annual income by the number of years your family might need support (often 10–20 years).
- Mortgage: Include your outstanding mortgage balance, if not already covered under debt.
- Education: Estimate future education costs for your children.
Add it all together to get a rough starting point. Then, subtract any savings or assets your family could use.
Consider Your Stage of Life
- Young adults: May only need enough to cover debts and funeral costs.
- Parents: Need more coverage for income replacement, childcare, and education.
- Empty nesters/retirees: May want permanent insurance for estate planning.
Don’t Forget Inflation and Lifestyle
A policy that feels big now might be smaller in 10–15 years. Make sure to account for rising costs and your family’s standard of living.
Final Thought
The best life insurance policy is the one that meets your real needs — not just a generic number. Talk to a licensed advisor to tailor your coverage to your unique situation. If you would like for a licensed professional to help you explore your options, fill in a quick form below to get connected to a Canadian Insurance Broker.
