Life Insurance

Updated: June 6 2024 | 6:45 pm

Ah, life insurance. It’s not a fun topic; it conjures up images of complicated paperwork and it sounds..boring. But if you’re dealing with estate planning, the issue of life insurance is always going to pop up. So let’s break this down over a virtual coffee (or wine, I won’t judge). To keep it simple, you can click on each link to below to read about the basics of life insurance.

Why do you need Life Insurance?

Rule of Thumb


Consider Assets

Adjusting for Inflation

Toss the Intangibles

How much do you need in the way of Insurance?

Future Obligations

The Smith Family

Current Assets

Grand Tally

Why Bother with Life Insurance, Anyway?

Imagine, for a moment, you’re the main character in a movie. Picture this: If you were to unexpectedly exit stage left (y’know, kick the bucket), what would the storyline be for those you left behind? Drama? Romance? Financial horror? Life insurance is basically your way of ensuring your loved ones get a feel-good, everything’s-going-to-be-alright kind of movie instead of a nail-biting thriller. Life insurance provides a financial cushion for your loved ones if something should happen to you. Let’s break down life insurance for you, in the form of a romance-horror thriller.

Rule of Thumb: The Classic 10x Salary Guideline

You might have heard financial wizards say, “Just get a life insurance policy that’s 10 times your annual salary.” Easy-peasy, right? If you’re earning $50,000 annually, you’re looking at a neat $500,000 policy.

But let’s be honest, life (and death) isn’t a one-size-fits-all situation. So while this rule is a good starting point, there’s more to the story.

Digging Deeper: Future Obligations and Expenses

1. Debts: Think mortgages, car loans, student loans, credit card debt…you get the picture. Your life insurance policy should cover these so that your family isn’t saddled with your debts.

2. Funeral and Final Expenses: Funerals can be costly. And by costly, they could range anywhere from between $7,000 to $10,000 on average. That’s a lot of cheddar for a final farewell.

3. Children’s Education: Do you have kiddos? If you want them to get a degree without a side of student loan debt, factor in those future tuition fees.

4. Day-to-Day Living Expenses: Your salary might be gone, but daily expenses like groceries, utilities, and Netflix subscriptions (because, priorities) still roll in.

Considering Current Assets

“But wait,” you might be thinking, “I already have some savings and investments. Do they count?” Absolutely! If you’ve got a good chunk of change in savings, investments, or other life insurance policies, subtract these from your estimated needs. After all, you’re trying to fill a gap, not build a mountain of gold.

Adjusting for Inflation and Changing Circumstances

The future is as unpredictable as next year’s top hit single. Remember to add a buffer for inflation, especially if you’re looking at a 20- or 30-year term policy. And life is full of twists and turns: marriage, more kids, a bigger house. It’s worth revisiting your policy every few years to ensure it’s still a good fit.

Toss in the Intangibles

This is where it gets a bit emotional. Some folks want their life insurance to cover more than just the basics. Maybe you dream of leaving a chunk of money to your favorite charity or ensuring your spouse can retire without a worry. Or perhaps you want to leave a legacy fund for your kids and future grandkids. These aren’t definite expenses, but they’re worth considering.

So…How Much Life Insurance Do You Need?

We’ve covered a lot of ground, haven’t we? While that 10x salary rule is a solid starting point, everyone’s number will be a bit different based on individual circumstances. Think of your life insurance as a safety net tailored just for you and your family.

Here’s a quick formula to get you started on calculating how much life insurance you’ll need:

(Annual salary x 10) + (Future obligations and costs) – Current assets = Rough estimate of how much life insurance you need.

Then, once you’ve got a ballpark figure, chat with a financial advisor or insurance expert. They’re like the directors of our life insurance movie – there to make sure everything goes according to script.

Case Study: The Smith Family

Let’s meet the Smiths: Sarah and John, both 35 years old, with two kids: Liam, 7, and Emma, 4. John works in tech and has an annual salary of $80,000, while Sarah is a part-time freelance writer, pulling in about $20,000 annually. Together, they’re contemplating how much life insurance they need.

1. Using the 10x Rule

  • For John: $80,000 x 10 = $800,000
  • For Sarah: $20,000 x 10 = $200,000

2. Future Obligations and Costs

  • Debts: They have a remaining mortgage balance of $250,000 and car loans totaling $30,000.
  • Funeral and Final Expenses: Let’s take an average and say $8,500 each.
  • Children’s Education: They want both of their kids to attend college. Estimating $40,000/year for a 4-year degree for each child (remembering inflation and rising education costs), that’s $320,000.
  • Day-to-Day Living Expenses: Monthly bills and day-to-day expenses are about $4,000. Without John’s salary, Sarah will need help for a few years. Let’s buffer for 5 years: $4,000 x 12 months x 5 years = $240,000.

3. Current Assets

  • They have a joint savings account with $50,000 in it, and investments totaling $30,000.
  • John’s current employer-sponsored life insurance policy is $100,000.

4. The Grand Tally

  • For John:
  • Needed: $800,000 (salary) + $250,000 (mortgage) + $30,000 (car loans) + $8,500 (funeral expenses) + $320,000 (education) + $240,000 (living expenses) = $1,648,500 (the funeral expenses can be put on the backburner)
  • Minus assets: $50,000 (savings) + $30,000 (investments) + $100,000 (existing insurance) = -$180,000
  • Total Life Insurance Needed for John: $1,468,500 (Rounded to $1.5 million for simplicity)
  • For Sarah (considering she doesn’t make as much as John):
  • Needed: $200,000 (salary) + $8,500 (funeral, again, this could be put on the backburner) = $208,500
  • Minus assets (Assuming they’d use joint assets first if John was still around): $0
  • Total Life Insurance Needed for Sarah: $208,500 (Rounded to $210,000 for simplicity)

While John and Sarah’s life insurance needs, based on their individual incomes, although vastly different, are both are essential.

Remember, these numbers are based on a case study and can change. John and Sarah (just like you, dear reader) would need to revisit their life insurance policies in a few years. This is particularly true as debts decrease, their kids grow up, and their circumstances evolve. The Smiths’ story underscores the importance of regular financial check-ins. But for now, they can rest easier knowing they’ve taken concrete steps towards securing their family’s future.

The final take: life insurance is one of those adult decisions that seems complicated, but it doesn’t have to be. It’s all about ensuring your loved ones are cushioned from the financial what-ifs of life. So, grab another coffee (or that wine), crunch some numbers, and give yourself a pat on the back. You’re taking steps to protect your family’s future storyline, and that’s worth all the toasts in the world! 🥂📝💡

Life Insurance

In the vast landscape of financial planning, life insurance occupies a significant place. It’s a tool that provides peace of mind, knowing your loved ones will be financially secure in the event of your untimely death. If you’re a resident of Canada, you have several options at your disposal. But which one is the best for you? This article delves into the various options available in Canada and aims to help you make an informed choice.

The Basics

Options Available

Term Life Insurance

Permanent Life Insurance

Best Option Available

Navigating the Canadian Landscape

Understanding the Basics

Before we discuss the best option available to you in Canada, it’s essential to understand what life insurance is. At its core, it is a contract between an individual and a company. In exchange for regular premium payments, the company you’re dealing with promises to pay a death benefit to the named beneficiaries upon the death of the insured.

Types of Options Available in Canada:

There are two primary categories available in Canada are as follows:

  1. Term Life Insurance
  2. Permanent Life Insurance

Let’s delve deeper into each option.

1. Term Life Insurance

As the name suggests, this option provides coverage for a specific term or period, typically 10, 20, or 30 years. If the insured dies during this term, the company pays the death benefit to the beneficiaries.


  • Affordable: This option tends to be less expensive than permanent insurance, especially when purchased at a younger age.
  • Flexibility: Policies can often be renewed or converted into a permanent option without a medical examination.


  • Temporary: Once the term ends, so does the coverage unless it’s renewed.
  • Increasing Premiums: While initial premiums are low, they can increase significantly upon renewal.

2. Permanent Life Insurance

This option provides coverage that lasts a lifetime. Within this category, there are three main types:

  • Whole Life Insurance: This offers guaranteed premiums, death benefits, and cash value that grows over time.
  • Universal Life Insurance: Here, part of your premium goes toward the death benefit, while the rest is invested, allowing for potential tax-deferred growth.
  • Variable Universal Life Insurance: Similar to universal life, but with an investment component that fluctuates based on market performance.


  • Lifelong Coverage: As long as premiums are paid, the coverage persists.
  • Cash Value Accumulation: Many permanent policies build cash value that can be borrowed against or even withdrawn.


  • Higher Premiums: Permanent insurance is generally more expensive than term insurance.
  • Complexity: Investment components can make these policies harder to understand.

So, What’s the Best Option Available in Canada?

The answer to this question depends on individual needs and circumstances. Here are a few considerations to help determine the best fit:

  • Budget: If you’re seeking affordable coverage for a specific period (e.g., until your mortgage is paid off), term insurance might be ideal.
  • Duration: If you want lifetime coverage, a permanent policy is your go-to. It’s especially useful for estate planning purposes.
  • Investment Considerations: If you’re financially savvy and want to combine insurance with investment, universal or variable universal life insurance may be attractive.
  • Simplicity vs. Flexibility: If you desire straightforward coverage without the intricacies of investments, whole life or term life might be suitable.

Navigating the Canadian Landscape

It’s essential to understand that insurance regulations and options can vary between provinces and territories in Canada. Thus, it’s beneficial to consult with a professional familiar with the nuances of the variety of options available to you in Canada. Moreover, options in Canada are robust; which guarantees a significant portion of your policy if the company fails.

There’s no one-size-fits-all answer to the best option. in Canada. It hinges on personal needs, financial goals, and individual circumstances. The key is to assess your needs, understand your options, and consult professionals to navigate the Canadian life insurance terrain effectively.

Life insurance is a vital tool for protecting your family’s financial future. However, determining the appropriate amount of life insurance coverage can be a challenging task. To ensure your loved ones are adequately protected, it is essential to calculate your family’s life insurance needs accurately. In this comprehensive guide, we will walk you through the key factors to consider when determining the optimal amount of life insurance coverage, empowering you to make informed decisions and secure your family’s financial well-being.

1. Start by assessing your family’s current financial obligations. Consider factors such as outstanding debts (mortgage, loans, credit cards), monthly bills, and ongoing living expenses. Calculate the total amount required to pay off debts and provide a financial cushion for your family’s daily needs. 

2.  Anticipate future expenses, such as education costs for your children, retirement savings for your spouse, or any other significant financial milestones. Evaluate the estimated amounts required for these goals and include them in your life insurance coverage calculation.

3. Determine the income replacement needs for your family in the event of your untimely passing. Consider your current income and the number of years your family would need support. A common rule of thumb is to aim for a coverage amount that is 5 to 10 times your annual income.

4. If your spouse or partner generates income, evaluate their earning potential and factor it into the life insurance calculation. Assess the additional financial responsibilities they would have to assume and adjust the coverage amount accordingly.

5. If you have young children, consider the cost of childcare, education, and other household expenses. Determine the amount required to ensure your children receive proper care and education, even in your absence.

6. Take into account any existing assets and savings that could provide financial support for your family. Subtract these amounts from your life insurance coverage calculation to avoid “overinsuring” and optimizing cost-effectiveness.

7. To ensure accuracy and personalized guidance, consult with a financial advisor or insurance professional. They can help assess your unique situation, consider all relevant factors, and provide expert recommendations tailored to your family’s needs.

8. Life circumstances change over time, and it’s crucial to review your life insurance coverage periodically. Major life events such as marriage, birth of a child, or significant career changes should prompt a reassessment of your coverage needs. Keep your vital life insurance policy up to date to align with your family’s evolving financial requirements.

Determining the right amount of life insurance coverage for your family requires careful consideration of various factors such as financial obligations, future expenses, income replacement needs, and existing assets. By evaluating these elements and consulting with a financial advisor, you can make an informed decision to protect your loved ones’ financial security. Remember to review your coverage periodically and adjust it as needed to ensure your life insurance remains aligned with your family’s evolving needs. With the appropriate amount of life insurance, you can have peace of mind, knowing that your family will be safeguarded during challenging times. This will help you examine your family’s vital life insurance needs. 

Whole Life Insurance. Variable Life Insurance. You have no doubt heard of these terms before, but may have little idea as to what any of these terms mean, let alone how these options affect your life. It can feel overwhelming. We have written up the different options available below, what they mean, and how you might find each option useful. Here are the following options for life insurance: 

  1. Term life insurance is one of the most popular and straightforward options. It provides coverage for a specific term, typically ranging from 10 to 30 years. If the policyholder passes away during the term, the death benefit is paid to the beneficiaries. This offers a higher coverage amount at an affordable premium, making it ideal for those seeking temporary coverage, such as young families or individuals with outstanding loans.
  2. Whole life insurance provides coverage for the entire lifetime of the policyholder. It combines a death benefit with a cash value component that accumulates over time. The premiums for whole life insurance are typically higher than term life insurance but remain level throughout the policyholder’s life. This type of insurance offers lifelong protection, cash value growth, and potential dividends, making it suitable for individuals seeking long-term financial security and estate planning.
  3.  Universal life insurance offers flexible coverage and a savings component. It allows policyholders to adjust the death benefit and premium payments to suit their changing needs. The policy accumulates cash value, which can be invested and grow over time. This type of insurance provides the flexibility to increase or decrease coverage, modify premium payments, and access the cash value. It suits individuals with changing financial circumstances and those seeking investment options within their policy.
  4.  Variable life insurance combines a death benefit with investment opportunities. Policyholders can allocate their premiums among a variety of investment options such as stocks, bonds, and mutual funds. The cash value and death benefit fluctuate based on the performance of the underlying investments. This offers the potential for higher cash value growth but also carries investment risks. It is suitable for individuals comfortable with market fluctuations and seeking growth potential within their policy.
  5. Indexed universal life insurance provides the opportunity to earn returns based on the performance of a selected stock market index, such as the S&P 500. It offers a minimum guaranteed interest rate while also allowing policyholders to participate in market gains. The cash value growth is tied to the performance of the index, providing potential for higher returns. Indexed insurance offers a balance between flexibility and growth potential, appealing to individuals seeking a mix of security and market-linked growth.
  6. Final Expense Insurance (Word Count: 250) Final expense insurance, also known as burial or funeral insurance, is designed to cover end-of-life expenses. It provides a smaller death benefit, typically ranging from $5,000 to $25,000, to cover funeral costs, medical bills, and outstanding debts. Final expense insurance is relatively easier to qualify for and often does not require a medical exam. It is suitable for individuals who want to ensure their loved ones are not burdened with immediate expenses after their passing.

Choosing the right life insurance policy is a crucial decision that depends on your financial circumstances, goals, and risk tolerance. Term life offers affordable coverage for a specific term, while whole life provides lifelong protection and cash value growth. Universal  offers flexibility and investment opportunities, while variable insurance combines a death benefit with market-linked investments. Indexed universal balances growth potential with security, and final expense insurance caters specifically to end-of-life expenses. Consider your needs and consult with a financial advisor to determine the most suitable insurance option that provides the desired financial security for you and your loved ones.