What Is Term Life Insurance?

Term life insurance provides death benefit coverage for a fixed period (10, 20, or 30 years). If you die within that term, your beneficiaries receive the death benefit tax-free. Term insurance is pure protection—you build no cash value and pay only for coverage. It's the most affordable way to protect your family, especially when you're young and have dependents.

The DIME Method: Calculate Your Coverage Need

DIME stands for Debt + Income + Mortgage + Education. Add these four components:

• Debt: Total outstanding debt (credit cards, car loans, personal loans, etc.)
• Income: Annual salary × years until retirement (typically 25–35 years). This replaces lost income if you die.
• Mortgage: Remaining mortgage balance. (Some prefer separate mortgage insurance, but DIME includes it here.)
• Education: Estimated cost of post-secondary for each child ($50,000–$100,000+ per child)

For example: $20,000 debt + ($60,000 × 30 years) + $300,000 mortgage + $150,000 for two children = $2,270,000 total need. A 30-year term policy for $2.25M would cost $30–$60/month for a healthy 35-year-old.

Term vs. Whole Life Insurance

Term insurance is pure protection. Whole life (permanent insurance) combines death benefit with a cash surrender value that grows over time. Term costs 75–90% less than whole life for the same benefit. Whole life makes sense only if you need lifetime coverage (no retirement date) and have significant assets. For most Canadian families, 30-year term is ideal—coverage lasts until kids finish education and mortgage is paid.

10-Year vs. 20-Year vs. 30-Year Term

Shorter terms cost less monthly but provide less total protection years. A 10-year term may cost $15/month but leaves your family unprotected after 10 years. A 30-year term at age 35 costs $30–$50/month and covers you until age 65 (retirement). Most experts recommend 30-year term for families with children or large debts. A 20-year term is a middle ground if budget is tight.

How Much Life Insurance Does Canada Need?

Statistics Canada and insurance industry data show most Canadian families are underinsured. Average coverage is $200,000–$400,000, but DIME calculations typically reveal needs of $1M–$3M for families with dependents. This gap exists because insurance is easy to procrastinate, and people underestimate the cost of replacing income. Young families with mortgages and children should aim for 10–12× annual income in coverage.