Start with 5 to 10 times your annual income, then adjust for what the rule misses: the mortgage, other debts, children’s education, a super visa undertaking and money sent home. Subtract savings and any group life through work. PolicyAdvisor calls 5 to 10 times income “a common rule of thumb” and warns it “can be too little or too much depending on your financial situation”. A $70,000 earner with a $400,000 mortgage and a parent on a super visa usually lands between $500,000 and $1 million.
What is the income-replacement rule of thumb?
Multiply annual income by 5 to 10. The idea is that the lump sum, invested, replaces the pay cheque for the years the family needs it. The FCAC lists the uses: replacing income, providing for dependants, funeral expenses and paying off debts. The multiple is a shortcut for the first two.
| Annual income | 5x | 10x |
|---|---|---|
| $50,000 | $250,000 | $500,000 |
| $70,000 | $350,000 | $700,000 |
| $100,000 | $500,000 | $1,000,000 |
| $150,000 | $750,000 | $1,500,000 |
Three caveats. PolicyAdvisor notes families “may not need to replace 100% of your after-tax income” and uses 70% in its example. The rule ignores debts, which are often the largest line for a recent buyer. And it ignores what you already have in savings and group cover.
What does the rule miss for a newcomer?
Four things: a mortgage bought at today’s prices, no extended family nearby to absorb a shock, remittances to family abroad, and a super visa undertaking. The DIME method, Debt, Income, Mortgage and Education, catches the first; you add the last two yourself.
| Line | What to add | Newcomer note |
|---|---|---|
| Debt | Car loan, line of credit, credit cards, student loans | Include loans in your home country if family would be chased for them |
| Income | Years of replacement x annual after-tax need | Use 70% of take-home as a starting point |
| Mortgage | Outstanding balance | Term life pays the family, not the lender; see mortgage insurance vs term |
| Education | Post-secondary costs per child | Larger if children may study abroad |
| Remittances | Annual amount x years | Counts as income replacement for parents abroad |
| Undertaking | Parent’s living costs plus visitor insurance renewals | Only while a parent is on a super visa |
| Minus savings | TFSA, RRSP, cash, existing insurance | Group life often 1 to 2 times salary and ends with the job |
How does a super visa undertaking change the number?
It adds the parent’s costs for the remaining stay. The host’s letter of invitation is a signed promise of support, and the parent may stay up to five years per entry. If the host dies, the parent still needs food, housing and next year’s visitor insurance.
Annual visitor insurance for a parent, $100,000 coverage, $0 deductible, stable pre-existing conditions covered, rates seen Oct 2026 in PolicyAdvisor’s tables — verify at quote time: about $1,600 at 55, $2,000 to $3,000 at 65, and $4,000 to $5,500 at 75, depending on insurer. Over four remaining years for a 70-year-old parent, renewals alone can approach $16,000. Add living costs and a return flight. Our super visa host page works a full example.
Worked example: a work permit holder in Ontario
A 36-year-old software developer on a work permit, income $95,000, spouse working part-time, one child aged 4, $450,000 mortgage, mother aged 68 on a super visa for three more years.
| Line | Amount |
|---|---|
| Income replacement: 70% of $70,000 take-home x 15 years | $735,000 |
| Mortgage balance | $450,000 |
| Other debt (car loan) | $20,000 |
| Child’s education | $60,000 |
| Mother’s costs: 3 years x ($12,000 living + $2,600 insurance) | $43,800 |
| Subtotal | $1,308,800 |
| Minus savings and group life (2x salary) | -$230,000 |
| Need | about $1,080,000 |
A 20-year term of $1,000,000 fits. The amounts are illustrative; the insurance line uses the age-65 to 70 range above, and the rest are assumptions the advisor replaces with your figures.
Can your status limit the amount?
Yes. Insurers cap newcomers by permit type, and the cap can sit below the need. Protect Your Wealth reports Canada Protection Plan, underwritten by Foresters Life Insurance Company, at $250,000 for permit holders and Assumption Life at $750,000 for work permit holders. PolicyAdvisor shows skilled work permits (TEER 0 to 3) at $2 million to $10 million at fully underwritten insurers, often with a filed PR application.
If the need is $1 million and the status caps you at $250,000, there are three moves: use a fully underwritten insurer such as Wawanesa Life’s Foreign Nationals program, stack two simplified-issue policies, or buy what you can now and add more after PR. Our eligibility page lists the caps by insurer.
What if the premium is too high?
Reduce the amount before you reduce the term. PolicyAdvisor’s sample rates put $500,000 of 20-year term at about $30 a month for a 30-year-old man and $45 at 40, non-smoker. Half the need covered for 20 years beats the full need covered for 10 years, because the risk does not end at year 10. See cost by age.
How do you get an exact number?
A 20-minute needs call. Bring your income, mortgage statement, debts, number of dependants, any super visa undertaking and your group benefits booklet. The advisor runs the lines above, checks which insurers accept your status at that amount, and quotes two or three. Super Visa Direct Insurance Services arranges life insurance with Canadian life insurers, including Wawanesa Life and Canada Protection Plan, through a managing general agency; our advisor disclosure explains how we are paid.
Nothing here is advice for your situation until you have spoken to a licensed advisor. Contact us with the figures above and we will size it with you.
Questions people ask
What is the 10 times income rule?
A rule of thumb that sizes cover at 10 times annual income. PolicyAdvisor describes 5 to 10 times as a common guide but warns it 'does not account for individual circumstances.' It is a starting point for a 20-minute needs call, not an answer. Debts, dependants and savings move the number up or down.
Should I count my mortgage separately?
Yes. The DIME method adds Debt, Income replacement, Mortgage balance and Education costs. Counting the mortgage inside an income multiple hides it. A $400,000 balance on its own can exceed five years of take-home pay, which is why newcomers with recent purchases are often under-insured.
Does a super visa undertaking change the amount?
It adds a line. The host promised to support the parent for the length of the stay. Add the parent's share of living costs for the remaining years plus annual visitor insurance renewals, which run $1,600 to $5,500 a year at ages 55 to 75 in the rate tables we track. See the super visa host page for a worked example.
Can a work permit holder buy as much as they need?
Not always. Insurers cap amounts by status: Canada Protection Plan issues up to $250,000 to work or study permit holders, Assumption Life up to $750,000, and several fully underwritten insurers go to $2 million or more with a filed PR application. If the need exceeds the cap, combine insurers or revisit after PR.
Should I include family abroad?
If you send money home, yes. Remittances are income replacement for someone, even if they are not in Canada. Add the annual amount times the years it would continue. Beneficiaries outside Canada are allowed at most insurers; see our page on naming a beneficiary abroad.
What if I cannot afford the full amount?
Buy what you can sustain and fix the term length first. A 20-year $500,000 term policy at 30 costs about $30 a month in PolicyAdvisor's sample table. Dropping the amount is better than dropping the policy. PolicyAdvisor warns that the largest policy is not the best choice if premiums become hard to sustain.
Talk to a licensed advisor
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Sources
- PolicyAdvisor: How much life insurance do I need (5-10x rule, DIME method)
- PolicyAdvisor: Life insurance for newcomers to Canada (sample rates, limits by status)
- Protect Your Wealth: Life insurance for work permit holders in Canada (limits by insurer)
- Financial Consumer Agency of Canada: Life insurance
- IRCC: Super visa forms and documents (letter of invitation and support)
- PolicyAdvisor: Super visa insurance cost tables