How much life insurance do you need? Term vs. permanent, explained
Life insurance is one of the few things you buy entirely for someone else. This guide walks through a simple way to estimate how much coverage your family might need, how term and permanent insurance differ, and what to expect when you apply in Ontario.
What life insurance is for
When someone who earns an income or cares for a family dies, the people left behind still have bills to pay. The payout, called the death benefit, can help your beneficiaries:
- Replace the income your family counts on
- Pay off the mortgage and other debts
- Cover childcare, education and other future costs
- Pay final expenses, such as funeral costs and taxes owed by the estate
- Protect a business, for example to fund a buy-sell agreement or replace a key person
A simple way to estimate how much you need
There’s no single right number, but a needs-based estimate is a good starting point. Add up what your family would need, then subtract what’s already in place.
Add up
- Debts: mortgage, lines of credit, car loans and credit cards
- Income replacement: your after-tax income multiplied by the number of years your family would need it
- Future costs: childcare and education
- Final expenses: funeral and estate costs
Then subtract
- Life insurance you already have, including group coverage through work
- Savings and investments your family could use
Term vs. permanent life insurance
Most people choose between two broad types of coverage.
| Term life | Permanent life (whole or universal) | |
|---|---|---|
| How long it lasts | A set period, such as 10, 20 or 30 years | Your whole life, as long as premiums are paid |
| Starting cost | Lower for the same amount of coverage | Higher |
| Cash value | None | Builds value over time (varies by policy) |
| Often used for | Mortgage years, raising children, income replacement | Final expenses, estate planning, lifelong needs |
Many families use term insurance to cover the years when their financial obligations are highest. Some term policies can be renewed or converted to permanent coverage later without new medical questions; check the policy wording.
Don’t rely only on coverage through work
Group life insurance through an employer is a valuable benefit, but it’s often a multiple of your salary, such as one or two times, which may not be enough on its own. Group coverage also usually ends if you leave the job, when you may be older and paying more for new coverage.
What to expect when you apply
- Health and lifestyle questions, and sometimes a medical exam or blood test, depending on your age and the amount
- Nicotine use makes a big difference to the price
- Answer every question fully and honestly; an incorrect answer can put a claim at risk
- Name your beneficiaries carefully and review them after big life events
In Canada, a death benefit paid to a named beneficiary is generally received tax-free. Special situations can differ, so ask a tax professional about yours.
Replacing an existing policy? Take extra care
Switching policies can make sense, but it isn’t always in your interest. In Ontario, when an existing life policy is being replaced, the agent must complete a Life Insurance Replacement Declaration that compares the old and new policies. Don’t cancel your current coverage until the new policy has been approved and is in force.
How Frank’s two-stage process works
Frank Insurance keeps the first step short. In Stage 1, you share your goal, an approximate amount and whether you’re thinking about term or permanent coverage. If more detail is needed, you get a secure link to a Stage 2 needs assessment. The public form never asks for your social insurance number, banking details or full beneficiary details.
Life insurance in two stages
Read the video text
- A simple two-stage process Share only what’s needed, when it’s needed.
- Stage 1: a short intake. Your goal, an approximate amount, and term or permanent coverage.
- Stage 2: a secure assessment. If more detail is needed, you get a secure link using your reference number.
- Never entered in the public form: Social insurance number, Banking or card details, Full beneficiary details.
- Talk it through with Frank. Ask your questions and review options before you decide.
- Start with Stage 1. Call or text (613) 777-0375 · frankinsurance.ca/life-insurance
Common questions
How much does life insurance cost?
It depends on your age, health, nicotine use, the amount and the type of coverage. Term coverage usually costs less at the start than permanent coverage for the same amount.
Can I get life insurance with a health condition?
Often, yes. Pricing and options depend on the condition and the insurer. Simplified or guaranteed-issue policies ask fewer questions but usually cost more and offer lower amounts.
Is the death benefit taxable?
In Canada, a death benefit paid to a named beneficiary is generally received tax-free.
When should I review my coverage?
After big life events: buying a home, marriage or separation, a new child, starting a business, or a change in income.
Start with a short intake
Tell Frank what you want to protect. No obligation, and nothing is applied for without your approval.
This article is general information, not financial, tax or legal advice. Coverage, pricing and eligibility depend on each insurer’s underwriting and policy wording.