Apr 23, 2026
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Most Canadians know they should have life insurance. But far fewer know how much they should buy, which type of insurance is right for them, or whether they even need it at all. In fact, a recent PolicyMe report highlighted that almost half (42%) of Canadians either don't have life insurance or are unsure if they do (1).
That's concerning. Not being properly insured can cost you — and in some cases, leave the people you love exposed to financial hardship.
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The good news is that figuring out how much coverage you need doesn't have to be complicated. Before you call an agent or click through an online quote, you can get most of the way there by answering three simple questions.
Do you actually need life insurance?
The main job of life insurance is to replace your income if you die and someone else depends on it. That's why your first step is to figure out who relies on your income; don't just factor in the needs of loved ones today, but consider how the loss of your income will impact your family in 10 or 20 years.
When viewed through this lens, determining whether you actually need life insurance becomes much easier.
For instance, if you've got young kids, a mortgage, or support a lower-earning spouse or partner, you almost certainly need life insurance. After all, without your income, they could face serious financial hardship and be forced to make difficult decisions, like selling the family home, scaling back education plans, or delaying retirement.
Don't let the loss of a steady paycheque catch you off guard. With PolicyMe, you can build a plan to protect your loved ones for as little as $21 per month.
If your savings are strong enough that your family would be financially intact without you, a life insurance policy may not be worth the cost.
The need for insurance is less clear if you're single, debt-free, and have no dependents. You may not need it today, but life doesn't tend to stay that simple.
If you expect that to change in the next few years, you may want to lock in coverage earlier, while you're younger and healthier. Premiums tend to be lower, and you avoid the risk of becoming harder to insure later.
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You can get a PolicyMe term life insurance policy with coverage up to $5 million with premiums starting at just $21 per month — making it easier for you to secure your family's financial future. Just answer four questions, and PolicyMe will provide you with an instant, no-obligation quote which is valid for up to 90 days. Most policies are approved without any medical tests, and you can opt for term lengths ranging from 10 to 30 years.
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Term or permanent life insurance: Which type fits your situation?
This is where many Canadians overspend. Permanent life insurance — whole life or universal life — offers lifelong coverage and can include an investment component. However, it can cost from five to 15 times more than term life coverage (2).
For most Canadians, term life insurance is the more practical choice. It covers you for a defined period, typically from 10 to 30 years. A term life insurance policy ensures that you are protected while your financial obligations are at their highest — while your mortgage is active, your kids are in school, and your partner still depends on your paycheque. In theory, as those obligations subside, so should your need for coverage.
Permanent insurance can make sense in specific situations. For example, if you're using it as part of an estate or tax planning strategy, or if you have a dependent with lifelong needs. But for the majority of working Canadians building a family and paying down a home, a well-structured term policy does the job at a fraction of the cost.
There is one detail you should check before buying. Most term policies include a guaranteed renewal or conversion option. This allows you to extend or convert your policy to permanent coverage without a new medical exam, and can be useful if your health changes before the policy ends. If you decide that you want to continue paying for coverage — perhaps to provide financial security for loved ones after you pass — consider renewing or converting before your current term policy expires.
How much coverage is enough?
Having the right amount of insurance coverage matters more than most people realize. If you have too little, it may leave your family short and unable to pay down debt or pay bills. Too much, and you could be paying unnecessary premiums for years. Unfortunately, while Canadian households have record levels of insurance coverage today, many remain underinsured, on average (3).
To find out how much you need, start with your debts. Add all outstanding mortgage balances and any car loans, lines of credit, or student loans that would otherwise have to be paid by your estate.
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But don't stop there. You also need to account for future expenses, such as replacing income for your family and covering childcare or education costs. For example, if your youngest child is two years old and you expect to pay for their education, you're looking at a minimum of 20 years of support.
While your insurance needs will depend on your individual situation, a general rule of thumb is to pay for coverage equal to seven and up to 10 times your annual salary. That puts the target range for a $90,000 salary between $630,000 and $900,000 — a figure that will surprise many who assume that $250,000 of coverage was plenty.
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What to do now
Once you've answered these three questions — do I need it, what type of coverage should I get, and how much — you're ready to move from guesswork to obtaining quotes.
As you do, here are a few things to keep in mind:
- Get at least two or three quotes from different providers before you commit
- Confirm whether the policy includes a guaranteed renewability or conversion clause
- Always consult with an insurance professional who can help you make the best choice
Finally, always read the premium schedule on your policy. Many term policies increase the premiums at renewal. If you're in good health, obtaining a new term policy at renewal may be cheaper than staying on an automatic renewal.
The key is to treat life insurance as an active decision, not a one-time purchase. Paying attention now, and revisiting it at key moments, can save you thousands of dollars and ensure your coverage works as intended when it matters most.
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Colin Graves is a Winnipeg-based financial writer and editor whose work has been featured in publications such as Time, MoneySense, MapleMoney, Retire Happy, The College Investor, and more. Before becoming a full-time writer, Colin was a bank manager for over 15 years.
