How Much Life Insurance Do I Need?

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“How much life insurance do I need” is a big question we get from clients all the time.

This is an important question and the answer really depends on your situation, your family , your income, your goals.

You should also consider insurance to cover against the 3 major risks that can throw your best-laid plans off track.  These are Life Insurance, Critical Illness Insurance and Disability Insurance.  The right insurance plan for most Vancouver families will typically include all 3 types of insurance.


What is life insurance? It’s pretty simple.  It is a tax free, lump sum payment that pays out if the insured person passes away.

The simple rule of thumb of how much life insurance you need works like this:

1) Pay off your debts and make sure there is enough money to take care of your family if you’re not there.

To do this – first add up all your debts – mortgage, credit cards, loans etc. This is your base amount to cover so you don’t leave debts behind for someone else to deal with.

2) Leave enough money to take care of your spouse and kids if you are gone. Usually this means replacing your income so your family can stay in the house and keep living at their current lifestyle. A lot of our clients also want to make sure the kids’ school is paid for.

The industry rule of thumb is to count 10x or 20x annual income for this.

Now add these 2 numbers together and you get a general idea of how much life insurance is right for you.

Use the PDF worksheet download on this page to figure out the right amount of life insurance for you.


Critical illness insurance pays you a lump-sum if you contract 1 of a number of named critical diseases.  The big ones are cancer, stroke, heart attack and coronary bypass surgery – but most companies offer much more coverage than this.  The payment is a tax free, lump sum of money that you can use to take time off work, get the best care possible and pay for the things that are not covered by your provincial health services plan.

The industry rule of thumb is to count 1x or 2x annual income for this, depending on your budget.  This means you can take 1 or 2 years off to recover without worrying about returing to work too early.

Use the PDF worksheet on this page to figure out how much critical illness insurance is right for you.


Disability insurance replaces your monthly income if you can’t work due to injury or illness.  You don’t have to be injured at work to claim on disability insurance.

There’s no right or wrong amount of insurance you should have, but these rules of thumb should give you a general idea of how to calculate how much life insurance you need.  If you fill in the PDF worksheet you’ll have a pretty good idea of how much life, critical illness and disability insurance is right for your family.

Click this link to download a free worksheet that you can use to determine how much life insurance is right for you.

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