How Much Life Insurance Do I Need? (Ontario Guide, 2026)
A simple, no-jargon way to calculate how much life insurance you need in Ontario — with real examples, a quick formula, and the mistakes to avoid.
Working out how much life insurance you need doesn’t require a spreadsheet or a finance degree. It comes down to one question: if your income disappeared tomorrow, how much money would your family need to stay financially secure?
This guide walks through two simple methods — a quick rule of thumb and a more accurate calculation — with real Ontario examples. By the end you’ll have a number you can trust.
The quick answer: 10–12× your income
If you want a fast estimate, multiply your annual income by 10 to 12.
Earning $80,000 a year? That points to roughly $800,000 to $960,000 of coverage. This rule is popular because it’s easy and it works surprisingly well for many families. But it’s blunt — it ignores your mortgage, your debts, how many kids you have, and what you’ve already saved. For a number you can actually plan around, use the DIME method below.
The accurate answer: the DIME method
DIME stands for Debt, Income, Mortgage, and Education. Add these four together and you have a coverage amount tailored to your life.
D — Debt. Total your non-mortgage debts: car loans, credit cards, lines of credit, student loans. You don’t want your family inheriting these.
I — Income replacement. Decide how many years your family would need your income, and multiply. A common choice is enough to support them until your youngest child is financially independent. If you bring home $70,000 and want to replace it for 15 years, that’s $1,050,000.
M — Mortgage. Add your outstanding mortgage balance so your family can stay in the home, mortgage-free.
E — Education. Estimate future post-secondary costs for your children. A rough figure is $20,000–$25,000 per child for a Canadian university student living at home, more if living away.
Then subtract what you already have: existing life insurance, savings, TFSAs, and non-registered investments earmarked for your family.
A worked Ontario example
Meet Sarah and Dev, a couple in Ottawa with two young children and a $420,000 mortgage.
| DIME component | Amount |
|---|---|
| Debt (car loan + line of credit) | $35,000 |
| Income replacement ($75,000 × 15 years) | $1,125,000 |
| Mortgage balance | $420,000 |
| Education (2 kids × $50,000) | $100,000 |
| Subtotal | $1,680,000 |
| Less: existing savings & group coverage | –$180,000 |
| Coverage needed | ~$1,500,000 |
That might sound like a large policy — but here’s the good news. Because Sarah and Dev are young and healthy, $1.5 million of 20-year term life insurance can cost less than a couple of takeout dinners a month. Term coverage is remarkably affordable, which is exactly why we usually recommend covering your full need rather than under-insuring to save a few dollars.
Don’t forget the non-earning spouse
One of the most common and costly mistakes is insuring only the higher earner. A stay-at-home parent provides childcare, cooking, cleaning, and household management that would cost tens of thousands of dollars a year to replace. If that parent passed away, the surviving spouse might need to pay for full-time childcare while continuing to work.
Most families should insure a stay-at-home parent for $250,000 to $500,000. It’s inexpensive and closes a gap that catches people by surprise.
What about coverage through work?
Group life insurance from your employer is a nice benefit, but it’s rarely enough on its own — it’s often capped at one or two times your salary, and it usually disappears the day you leave your job. Treat it as a bonus layer on top of a personal policy you own and control, not as your whole plan.
How long should the coverage last?
Match the term to the length of your obligations:
- 20-year term is the sweet spot for most parents — it covers the years your children are dependent and the bulk of your mortgage.
- 30-year term suits younger parents or those with a fresh 30-year mortgage.
- 10-year term can work for shorter, specific debts.
Not sure? A licensed advisor can model it in a few minutes. Want to see how the different lengths compare? Read our guide on term vs. whole life insurance.
Review your number when life changes
Your coverage need isn’t fixed. Revisit it whenever you:
- Have a child
- Buy a home or move to a bigger mortgage
- Get married or divorced
- Start a business
- Get a significant raise
The bottom line
A five-minute DIME calculation beats any rule of thumb. Add up your debts, income replacement, mortgage, and education costs, subtract what you already have, and you’ve got your number.
Because term life is so affordable in Ontario, the cost of properly covering your family is usually smaller than people fear — and far smaller than the cost of getting it wrong.
Want the exact number for your family? Get a free quote in a few minutes, or call us and we’ll run the DIME calculation with you — no pressure, no cost.
Frequently asked questions
What is the 10x income rule for life insurance?
The 10x rule suggests buying coverage equal to about 10 times your annual income as a fast starting estimate. It's a useful rule of thumb but ignores your specific debts, mortgage, number of children, and existing savings — which is why a proper needs calculation (DIME) usually gives a more accurate number.
How much life insurance does a stay-at-home parent need?
More than most people think. A stay-at-home parent provides childcare, household management, and other services that would be expensive to replace. Many families insure a stay-at-home parent for $250,000 to $500,000 to cover childcare and household costs if they passed away.
Is it better to have too much or too little life insurance?
Being slightly over-insured is far safer than being under-insured, but term life is cheap enough that you rarely have to choose. The goal is to cover your family's real obligations with a modest cushion — not to buy the largest policy a salesperson will sell you.