Life insurance calculator for Canadians
Calculate how much life insurance you need to protect your loved ones
in the following 3 easy steps.
Estimate 5 minutes to complete. Free, no signup.
How this calculator works
The calculator runs a needs analysis, the same method a licensed advisor uses in a coverage review. It adds what your family would need, subtracts what they would already have, and the difference is the coverage to buy:
- A. Debts and final expenses. Mortgage balance, loans, and final expenses such as the funeral and legal costs, everything that should be cleared immediately.
- B. Future needs. The share of your income your family would need each year, for the number of years they would need it, plus an emergency fund, childcare and education goals. Any survivor pension income, such as a CPP survivor pension, reduces the annual need first.
- C. What you already have. Savings, investments, existing life insurance and other death benefits, all of which offset the need.
The income portion is not a simple multiplication. A payout arrives as a lump sum and earns returns while it is drawn down, so the calculator converts the annual need into a present value using a standard actuarial factor table, assuming the money earns about 3 percent net of inflation. Replacing $40,000 a year for 20 years therefore needs roughly $595,000 today, not $800,000. That keeps the recommendation realistic instead of inflated.
Two worked examples
A family with a mortgage and two kids
A 36 year old earning $80,000 with a $400,000 mortgage, $20,000 of other loans, and $80,000 of group life coverage through work. The family would need 60 percent of income for 20 years, and would receive an estimated $8,000 a year in survivor pension income.
| A. Mortgage, loans and $15,000 final expenses | $435,000 |
| B. Income replacement, $40,000 a year for 20 years | $595,200 |
| B. Education fund and emergency fund | $65,000 |
| C. Savings, TFSA, RRSP and group coverage | −$205,000 |
| Suggested coverage | $890,200 |
|---|
In practice this family would shop a $900,000 or $1 million Term 20 or Term 25 policy, timed to outlast the mortgage and the youngest child's dependence.
A 55 year old whose Term 20 is expiring
The original $750,000 policy was sized for a young family. Now the mortgage is down to $120,000, the kids are independent, and a spouse would need 50 percent of a $95,000 income for 10 years, offset by $15,000 a year of pension survivor income and $150,000 of savings and investments.
| A. Mortgage and $20,000 final expenses | $140,000 |
| B. Income replacement, $32,500 a year for 10 years | $277,225 |
| C. Savings, TFSA and investments | −$150,000 |
| Suggested coverage | $267,225 |
|---|
The need did not disappear, it shrank to about a third of the original policy. That changes the renewal decision completely, and our guide to renewing, converting or buying new walks through what to do with a smaller number. If your estate will face a tax bill at death, part of the need may also be permanent rather than term, covered in life insurance and estate taxes.
What to do with your number
Round to a standard band, insurers price at levels like $500,000, $750,000 and $1 million, and pick a term that outlasts the obligations behind the number: the mortgage amortization, the years until the kids are independent. Then price it. Typical premiums by age are in our guide to what life insurance costs in Canada, and our quote tool shows estimated premiums from Canadian insurers for your age and coverage amount in a few minutes.
Frequently asked questions
How much life insurance do I need in Canada?
Enough to clear your debts and final expenses, replace the share of your income your family would need for as long as they would need it, and fund goals like education, minus what you already have. You will sometimes see a shortcut of 10 times income. It is a reasonable sanity check, but it ignores your debts, your partner's income, your savings and your existing coverage, which is exactly what the calculator above accounts for.
Is this calculator free, and do you collect my information?
It is free and runs entirely in your browser. There is no signup and the numbers you enter are not sent to us.
Why is the income replacement amount less than income times years?
Because the payout arrives up front and earns returns while your family draws it down. The calculator uses a present value factor table assuming about 3 percent growth net of inflation, the same approach insurer calculators use.
Should I include my mortgage if the bank offered me mortgage insurance?
Enter your full mortgage balance as a debt. If you actually hold lender mortgage insurance through your bank, list it under insured mortgages in the assets step. Keep in mind that lender coverage pays the bank rather than your family, shrinks as the balance falls, and ends when you move or refinance.
Does the calculator account for CPP survivor benefits?
Yes. Enter the expected annual amount in the survivor pension income field and the calculator reduces the income need before computing the lump sum. Your Service Canada account shows your estimated CPP survivor amounts.
Is the payout taxable?
No. A death benefit paid to a named beneficiary is received tax free in Canada, so the amount you calculate is the amount your family receives. The full rules, including the exceptions around estates and cash value, are in is life insurance taxable in Canada.