🛡️Life Insurance Calculator

Term vs. Whole Life in Canada

In Canada, Term Life insurance is popular for its affordability and is often used to cover specific periods like a 25-year mortgage. Permanent (Whole Life or Universal Life) insurance offers lifelong coverage and a cash value component. The Financial Consumer Agency of Canada (FCAC) recommends choosing a policy that aligns with your long-term goals. Use this calculator to compare the 'cost of waiting' versus locking in a rate while you are younger and healthier.

Financial Consumer Agency of Canada (FCAC)

Tax-Free Status of Canadian Death Benefits

A major advantage of life insurance in Canada is that the death benefit is generally paid out tax-free to your beneficiaries. This means if you calculate a need for $1 million CAD to cover your family's future, they will receive the full amount without CRA deductions. Our tool helps you calculate the exact 'gap' in your family's financial plan, ensuring your loved ones are fully protected from day one.

Canada Revenue Agency (CRA)

Insurance for Business Owners and Capital Gains

For Canadian business owners, life insurance can be used to fund a buy-sell agreement or cover future capital gains taxes upon death (e.g., on a family cottage or corporate shares). Statistics Canada notes that many SMEs fail due to lack of succession planning. This calculator includes fields for these complex Canadian tax liabilities, helping you preserve your estate for the next generation.

Statistics Canada – Small Business Trends

How much life insurance do I need in Canada?

A common 'rule of thumb' in Canada is 10 to 15 times your annual income. However, a more accurate method involves the 'DIME' formula: Debt, Income, Mortgage, and Education. Given the high cost of housing in provinces like Ontario and BC, your mortgage balance is often the largest factor. This calculator uses the DIME method to provide a personalized coverage recommendation for your Canadian life.

Can I have multiple life insurance policies in Canada?

Yes, many Canadians combine a basic group policy through their employer with a private individual policy for better portability and higher coverage limits. If you change jobs, your group coverage often ends, leaving you vulnerable. This tool helps you aggregate all your current death benefits to see if your total 'coverage stack' meets your family's real-world financial needs.

What is 'Mortgage Life Insurance' vs. Term Insurance?

In Canada, banks often offer mortgage life insurance where the payout goes directly to the lender to clear your debt. However, Canadian financial advisors often prefer individual Term Insurance because it is more flexible—your beneficiaries choose how to spend the money, and the coverage doesn't decrease as your mortgage goes down. Our tool helps you decide which path offers better value for your premium dollars.

Why Life Insurance?

Life insurance provides financial protection for your dependents if you pass away. It replaces your income, pays off debts, and covers future expenses like children's education.

Calculation Method

This calculator uses the "needs analysis" approach which sums income replacement (using annuity present value), outstanding debts, education costs, and final expenses, then subtracts existing coverage.

Term vs. Permanent Insurance

Term insurance provides coverage for a specific period (10-30 years) at lower costs. Permanent (whole life) insurance offers lifelong coverage with cash value, but costs significantly more.

When to Re-evaluate

Review your insurance needs after major life events: marriage, children, home purchase, job change, or debt payoff. Your needs change over time.

Rule of Thumb

A common rule is to have 10-12x your annual income in life insurance coverage. However, this calculator provides a more accurate analysis based on your actual needs.