Your guide to choosing life insurance

If anything were to happen to you, would your family be financially impacted? Could they support themselves? Could they replace any unpaid labour you provide, such as child care or caregiving for a loved one? Or do you have debts that others would become responsible for?

If you have people in your life who would be affected financially if you passed away unexpectedly, you should consider life insurance. Life insurance can help provide for your loved ones if you no longer can.

Keep in mind: If you don't have loved one ones that you need to protect, that doesn't mean life insurance can't be useful for other goals. For example, life insurance can still be important for estate planning or, if you're a business owner, for succession planning. 

3 steps to determining how much life insurance you need

Step 1: Estimate your loved ones' financial needs if you pass away.

To get a quick estimate, 7 to 10 times your salary may be a good start. However, if you want a more personalized estimate based on your situation, use "L-I-F-E" as a guide.

Step 2: Assess what resources can meet those needs. 

Go over your finances and identify any resources that aren't earmarked for other purposes and could be used by your loved ones after your death. These could include an existing Registered Education Savings Plan (RESP) account for a child, new income available after your death (such as Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) survivor benefits) or a brokerage account not already intended for a financial goal. 

Step 3: Have enough insurance to cover any gap. 

Your life insurance should cover any difference between the amount of funds your loved ones will need and the resources available to cover those needs. Note that you can always choose a higher amount if the additional cost is worth it to you. 

A financial advisor can walk you through these steps and help calculate your life insurance coverage. To get a ballpark estimate of how much coverage you might need, you can also try our life insurance calculator.

What type of life insurance should you buy?

There are two types of life insurance: term and permanent. How you choose between them depends on your goals, how long you'll need the insurance and how much you want to spend.

Term insurance is generally used to cover a specific time frame versus a lifetime need. It's also typically the most affordable type of life insurance, making it a great choice if you still have kids at home and you're paying a mortgage. When the initial term period is up, you may be able to continue the policy, but premiums could rise.

Permanent insurance covers your entire lifetime and can be used for a number of goals, offering greater flexibility, but it is also more expensive than term insurance. You may be able to use permanent insurance to ensure you leave a specific amount of money to heirs or a charity, regardless of how long you live. Some policies also offer flexibility to use the death benefit for long-term care expenses, if needed. Many permanent insurance policies also allow you to build cash value within the policy.

Term vs. Permanent Life Insurance 

How we can help

Life insurance needs can change over time and the coverage you have today may not be what you need tomorrow, so it's important to discuss your options with your Edward Jones financial advisor. They can look at your entire financial picture and help you choose and purchase a life insurance policy that meets your needs.