Life Insurance

How Much Life Insurance Do You Actually Need in Alberta?

Most people either have too little coverage or are paying for more than they need — both are problems. Underinsurance leaves your family exposed. Overinsurance means you're wasting money every month on premiums that could go elsewhere. Here's how to get it right.

There's no universal answer to how much life insurance you need — it depends on your debts, your income, your mortgage, your dependents, and whether you're employed or self-employed. But there's a straightforward framework that helps most Alberta families get to the right number quickly.

The DIME Method: A Simple Starting Framework

The DIME method stands for Debt, Income replacement, Mortgage, and Education. Add these four numbers together and you have a reasonable baseline for your coverage needs.

• Debt — All outstanding debts excluding your mortgage: credit cards, car loans, personal loans, lines of credit.
• Income replacement — Your annual income multiplied by the number of years your family would need support. A common rule of thumb is 10 years, but this depends on your family's situation and your spouse's earning capacity.
• Mortgage — The remaining balance on your home loan.
• Education — An estimate of post-secondary education costs for each child. In Alberta, budget $60,000–$100,000 per child as a rough figure.

Worked Example 1: Calgary Family with Mortgage and Two Kids

Scenario: Both spouses are 37. One earns $120,000/year and is the primary earner. The other works part-time and earns $45,000/year. They have a $550,000 mortgage, $40,000 in other debt, and two children aged 6 and 9.

This family should likely carry $2M on the primary earner and $1.2M–$1.5M on the secondary earner. The secondary earner's death would require childcare, household support, and income replacement — not just mortgage coverage.

Worked Example 2: Self-Employed Professional, No Dependents

Scenario: A 40-year-old Calgary consultant, self-employed, incorporated, no dependents, no children. Annual revenue: $180,000. They have $250,000 in business debt and a $400,000 personal mortgage. Their spouse earns $85,000 independently.

This person's needs look very different. With no dependents relying on their income long-term, the primary concern is debt coverage — both personal and business — plus any impact on their spouse's lifestyle.

• Business debt: $250,000
• Mortgage: $400,000
• Income replacement (3–5 years to give spouse stability): $540,000–$900,000
• Total range: $1,190,000–$1,550,000

The right number depends on conversations about the business, any partnership agreements, and what their financial plan looks like. Self-employed Albertans should also consider disability insurance as a companion to life coverage — since the risk of being unable to work is statistically higher than the risk of dying before age 65.

The Problem with Group Coverage Through an Employer

Many Albertans have life insurance through their employer's group benefits plan and assume it's sufficient. It rarely is. Group coverage is typically 1–2x your annual salary — far below the DIME calculation for most families with a mortgage and children.

More importantly: group coverage ends when your employment ends. If you change jobs, lose your job, or go self-employed, that coverage disappears — and you'll be applying for new coverage at an older age and potentially with new health conditions.

Individual term life insurance is portable and doesn't depend on your employment status. For incorporated professionals and self-employed Albertans with no group plan, individual coverage isn't optional — it's the only option.

Frequently Asked Questions

Also see: Term vs. Whole Life Insurance in Canada to understand which type of coverage fits your situation.