Life Insurance Needs: Getting the Number Right
Most Canadians either have no life insurance, or have an arbitrary amount chosen years ago that hasn't been updated since. The DIME method gives you a principled, systematic way to calculate exactly how much coverage your family would need to maintain their standard of living, pay off the home, clear debts, and fund education — without you.
Why the DIME method works
DIME calculates coverage based on specific financial obligations rather than a generic multiplier like "10× salary." Each component addresses a distinct financial need your family would face. The income component funds ongoing living expenses. The mortgage component ensures the family can stay in the home. Debt clearance eliminates monthly payment burdens. Education funding honours your commitment to your children's future.
Term vs permanent insurance
For most Canadian families, term life insurance is the right answer. A 20-year term policy covers the period of maximum financial exposure: young children, large mortgage, peak earning years. By the time the term expires, your mortgage is largely paid, children are independent, and your investment portfolio has grown. Permanent (whole life) insurance is appropriate for estate planning, business succession, and specific tax strategies — not as a default product.
| Policy Type | Term (20-yr) | Whole Life | Verdict |
|---|---|---|---|
| Monthly premium ($1M coverage) | $45–80/mo | $700–1,200/mo | Term wins on cost |
| Coverage period | Fixed 20 years | Permanent | Depends on need |
| Cash value | None | Yes (low return) | Invest the difference |
| Right for | Families, income protection | Estate, business owners | Most: term |
When to update your coverage
Review your coverage after every major life event: marriage, having children, buying a home, starting a business, or a significant income change. A policy purchased at 28 with no children and a $300,000 condo is almost certainly underinsured for a 38-year-old with two kids and a $900,000 mortgage.