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Tip of the week #2: Figure out how much coverage you need

Helpful Tips, Insurance

Posted by Empire Life

Sep 8, 2020 8:00:00 AM

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Last week we went over the question” Why do I need life insurance?”. This week we’ll tackle the “how” – as in “how much life insurance you and your family need”. This is a fairly straightforward process but requires some legwork and university-level math skills (that’s a joke, BTW).

You can start by gathering some key personal financial information and estimating how much your loved ones would need to meet current and future financial obligations without you. This includes things like mortgage balances, personal loans, credit card debt, education expenses, and living expenses.  The good news is we have a simple tool here on our website to do the math for you.

One simple way to think about it is that you probably need enough insurance to cover somewhere between 5x and 10x your current salary, depending on your age and how much you make. One recent study found that Canadians households who own some form of life insurance have enough coverage to replace, on average, about 2x their income*. That’s probably not enough. On the brighter side, the average gap is only about $150,000 in coverage*.

While that may sound like a lot of money, today the monthly cost for a 20 year term insurance policy for $150,000 is only about $16 for a healthy, 35 year old woman who doesn’t smoke. Curious how much a 10 or 20 year term policy would cost you? You can get a quick quote from us here and even buy a policy in as little as 15 minutes.

Next week we’ll go over some of the life insurance terminology you’ve probably heard of before but might not be ready to use in a conversation yet. Don’t worry, there’ll be pictures.

* LIMRA: Canadian Life Insurance Ownership Study, 2020