How much Life Insurance do you need in Canada?

When it comes to life insurance, one of the frequently asked questions that comes across is 'how much life insurance do I need'?

The amount of life insurance you need will vary from person to person as it depends on each individual's circumstance as well as the type of life insurance you choose. Generally speaking, it should at least be an amount to cover your financial responsibilities if you were to pass away.

While there are various ways to calculate how much life insurance you may need, below are some tips that could help you understand the factors that are involved.

A life insurance calculator could also help you determine how much you need, or you could also speak to a licensed life insurance advisor.

To determine how much life insurance coverage you need, a first step you can take is to identify the amount of money your family will need to help cover your financial obligations once you were to pass away. You can start by adding together the different financial obligations you've got that will remain after your passing.

Your financial obligations may include debts like your mortgage, unpaid loans and expenses like children's post-secondary education and your final expenses (cost for funeral etc.) that you will leave behind for your family.

The next step would be to add up all your savings and income your family will continue to have after you pass away. These may include any existing life insurance plans, savings, and other sources of family income apart from yours.

Finally, the amount of life insurance coverage you need can be calculated by subtracting your total financial assets and incomes from your total financial obligations. You can also consider leaving behind extra money for your family. 

If you were to look at how much life insurance you need in the format of an equation, it would be:

• Calculate the sum of all your financial obligations.
• Calculate the sum of all your savings and income.
• (Your total financial obligations) minus (Your total savings & income) equals the amount of life insurance coverage you might need.

You can check how much coverage you may need for TD Term Life Insurance with the TD Life Insurance Calculator. With this calculator, you can get an estimate of how much coverage you may need.

There are different options to choose from when it comes to purchasing the right life insurance policy. The options vary with every insurer. You should select what suits you best. 

There are many factors that go into determining your life insurance premiums. Some factors that are used to calculate your premium payment could include: the coverage amount you select, sex, date of birth, health, lifestyle, and type of life insurance product.

Let's look at a few hypothetical scenarios to understand the coverage and premium amounts for TD Life Insurance.

The amount of term life insurance coverage you need will be based on your personal circumstances. Here are two hypothetical scenarios that are quite different from each other in terms of personal circumstances and illustrate the varying degrees of life insurance coverage needs. Using the TD Life Insurance Calculator, we will use hypothetical financial information to arrive at the results as shown below. 

Note: The results of the TD Life Insurance Calculator will vary based on the information entered. The premiums shown here are as of 1^st Feb 2024.

Scenario #1

Dominique is 35 years old and just got married. He just bought a house and plans to start a family soon. He has 20 years left on his $600,000 mortgage and is looking to replace 10 years of his income if he were to pass away. Dominique is considering TD Term Life Insurance and is using the TD Life Insurance Calculator to get an estimate of how much term life insurance coverage he needs.

He answered all the questions in the calculator, and he was suggested $1,050,000 in coverage. The TD 20-Year Term Life could be a good product for Dominique because he has longer debt obligations such as his mortgage. As a healthy, non-smoking 35-year-old male, he would pay $62.10/month for his suggested coverage.

Scenario #2

Mohammed just turned sixty. His two children have left home and are starting their own families. He has five years left on his mortgage and he is hoping to retire once it’s paid off. Mohammed wants to pay off his existing mortgage ($156,000) and take care of his grandchildren's education by leaving behind something extra for them.

He answered all the questions in the TD Life Insurance Calculator, and he was suggested $400,000 of coverage.

The TD 10-Year Term Life may be a good product for Mohammed because he has shorter-term financial responsibilities.

As a healthy, non-smoking 60-year-old male, Mohammed would pay $167.40/month for the TD 10-Year Term Life plan with $400,000 of coverage.

If you want to calculate how much coverage you might need, please refer to the TD Life Insurance Calculator.

It's great that you're actively trying to find the right kind of life insurance policy. To make the right decision for you and your family, you'll have to assess your needs based on your current situation. You could also speak with various insurers to understand the different plans available in the market. There are several options, including various types of Term Life Insurance. There's also the option of Guaranteed Acceptance Life Insurance if you're between the ages of 50 and 75 and you are worried about pre existing medical conditions you may have.

Do both my spouse and I need life insurance?

While the decision is up to you, do keep in mind that even if one or both of you earn an income, if either of you were to pass away, the surviving spouse would be left to fulfill all the financial obligations, be it a mortgage or your child's education.

How much life insurance do I need if I'm over 60 years of age?

Depending on your situation and how many dependents you have, you can assess how much coverage is required. At 60, there are still several life insurance options.

What if I need to change the coverage later?

It is advisable to consult with your insurer about making modifications. You could check with your insurer if you could convert your term life insurance plan into a permanent plan. Although, there may be age or other restrictions while requesting the change (e.g., increasing coverage) so do consult with your insurer.

What if I have life insurance through my employer?

Depending on the coverage policy, it may not be sufficient for your family's needs. Also, the policy may not be portable. If you were to leave your employer, you could lose your coverage. Therefore, it could be a good idea to assess your needs to ensure you are properly covered. Then you can top up your employer-based coverage with individual coverage if needed.