How Much Life Insurance Do I Need? The DIME Method

The short answer

You need enough life insurance to pay off what you owe, replace your income for as long as your family relies on it, and fund the goals you'd want met anyway, minus the savings and coverage you already have. For many families with young children and a mortgage, that number is higher than they expect.

Why "ten times your salary" is only a start

The rule of thumb is easy to remember, but it ignores the things that actually drive the number: the size of your mortgage, how many children you have and how old they are, whether your partner works, and what you've already saved. Two people on the same salary can need very different amounts.

A better way: the DIME method

DIME stands for Debts, Income, Mortgage and Education. Add them up, add final expenses, and subtract what you already have.

Debts + (Income × years) + Mortgage + Education + Final expenses − Existing coverage and savings

A worked example

A Burnaby parent earns $85,000 and has two children, a $420,000 mortgage and $18,000 in other debts. They want to replace 10 years of income and set aside $40,000 for each child's education. They already have $150,000 in savings and group coverage.

Income: $85,000 × 10 = $850,000
Mortgage: $420,000
Other debts: $18,000
Education: 2 × $40,000 = $80,000
Final expenses: $15,000

Total needs come to $1,383,000. Less $150,000 already in place, the estimate is about $1,233,000 of coverage.

You can run your own numbers with the life cover calculator on our home page.

What to count as coverage you already have

Individual policies you own.
Group life insurance through work. Count it, but carefully. It's often only one or two times your salary, and it usually ends when you leave the job.
Savings and investments your family could actually use.
Government benefits. The Canada Pension Plan pays a one-time death benefit of $2,500 and may pay survivor and children's benefits, but these are modest.

Stay-at-home parents need coverage too

A parent who doesn't earn a salary still provides childcare, transport and running the home. If they died, the family would have to pay for much of that. Coverage for a stay-at-home parent is often based on what those services would cost until the children are older.

Term or permanent?

Term life insurance covers you for a set period, commonly 10, 20 or 30 years. It's the most affordable way to protect your family during the years they depend on your income and while the mortgage is being paid down.

Permanent life insurance (whole life or universal life) lasts your whole life and can build cash value. It's usually used for goals that don't expire, such as covering taxes due on your estate, leaving a legacy, or supporting a dependant with lifelong needs.

Many families combine the two: a large term policy for the busy years and a smaller permanent policy for the long term.

What affects the price

Premiums depend on your age, health, smoking status, the amount of coverage and the length of the term. Buying earlier generally costs less, because premiums are set by your age and health when you apply.

Details that matter

The death benefit is generally paid tax-free to your beneficiaries in Canada.
Name your beneficiaries on the policy so the money can bypass your estate.
If you name a child under 19 as beneficiary, appoint a trustee. In British Columbia, money for a minor with no trustee named is generally paid to the Public Guardian and Trustee.
Review your coverage when you marry, have a child, buy a home, separate or change jobs.

This article is general information for people in British Columbia, current as of September 16, 2026. It isn't financial, tax, legal or insurance advice. Limits and rules change, and the right choice depends on your situation. Book a consultation to talk it through.