How Much Life Insurance Do You Actually Need? A London, Ontario Guide

Most people either have too much life insurance or not enough. Both cost you money — one through unnecessary premiums, the other through a devastating gap if something happens. Here is how to figure out what you actually need.

Why Most People Get Life Insurance Wrong

The two most common mistakes I see with London families:

1. Buying whatever the bank offers at mortgage renewal. Bank mortgage insurance is almost always more expensive than an equivalent term policy, and the coverage decreases as your mortgage shrinks while the premium stays the same.

2. Guessing a round number. "$500,000 sounds about right" is not a plan. Your insurance needs depend on your specific debts, income, savings, and family situation.

The Needs Analysis Approach

A proper life insurance needs analysis calculates the gap between what your family would need and what they would already have. Here is the framework:

What Your Family Would Need

• Income replacement: How many years of income does your family need? If you earn $100,000 and your spouse needs 15 years of support, that is $1.5 million before adjusting for investment returns.
• Debt payoff: Mortgage balance, car loans, lines of credit, student loans.
• Future expenses: Children's education, childcare costs if a stay-at-home parent needs to return to work.
• Final expenses: Funeral costs, estate settlement, potential tax liabilities.
• Life changes: If you are going through a separation or divorce, your insurance needs will shift significantly. See our financial planning for divorce guide for how to reassess coverage during a marital transition.

What Your Family Would Already Have

• Existing savings: RRSPs, TFSAs, non-registered investments.
• Group life insurance: Many London employers provide 1-2x salary in group coverage.
• CPP survivor benefits: Your spouse may receive CPP survivor pension.
• Spouse's income: If both partners work, the surviving spouse has ongoing income.

The Gap = Your Insurance Need

Subtract what they have from what they need. That gap is how much life insurance you should carry.

Term vs. Whole Life: Which Makes Sense?

Term life insurance is the right choice for most London families. It covers a specific period — typically 10, 20, or 30 years — at the lowest cost. A healthy 35-year-old can get $1 million in 20-year term coverage for roughly $40-60 per month.

Whole life insurance makes sense in specific situations:

• Estate planning: If you have a large estate and want to cover the final tax bill so your family does not have to sell assets. Our estate planning guide for Ontario families covers how life insurance fits into a comprehensive estate strategy.
• Corporate-owned policies: Business owners can use corporate-owned life insurance to extract wealth from the corporation tax-efficiently.
• Charitable giving: Naming a charity as beneficiary provides a large donation at a fraction of the cost.

If someone is pushing whole life insurance as an "investment," be skeptical. For most families, buying term and investing the difference produces better outcomes. For a detailed comparison, read our term vs whole life insurance guide.

Common Scenarios for London Families

Young Family with a Mortgage

A couple in their 30s with two kids, a $400,000 mortgage, and household income of $150,000 typically needs $1-2 million in term coverage. A 20 or 25-year term aligns with when the mortgage is paid off and the kids are independent.

Single Income Household

If one parent stays home with the children, insurance on both parents matters. The stay-at-home parent provides childcare worth $30,000-50,000 per year. If that parent passes away, the working parent needs funds for childcare and household support.

London Business Owners

Incorporated professionals and business owners have additional considerations:

• Key person insurance protects the business if a critical owner or employee dies.
• Buy-sell agreements funded by insurance ensure surviving partners can buy out a deceased partner's share.
• Corporate-owned life insurance allows the corporation to pay premiums with after-corporate-tax dollars and pass the death benefit through the capital dividend account.

Read more about corporate life insurance strategies.

What About Group Life Insurance Through Work?

Many London employers — Western University, London Health Sciences Centre, major corporations — offer group life insurance as part of their benefits package. This is valuable, but it has limitations:

• It disappears when you leave. Change jobs or get laid off, and your coverage ends.
• It may not be enough. 1-2x salary rarely covers a family's full needs.
• You cannot customize it. The amount and terms are fixed.

Use group insurance as a foundation and supplement it with personal coverage to fill the gap.

How a Financial Advisor Helps with Life Insurance

An independent financial advisor does not sell insurance products from one company. I analyze your complete financial picture — income, debts, savings, goals, tax situation — and determine exactly how much coverage you need and what type fits your plan.

The insurance recommendation is part of your broader financial plan, not a standalone product sale. This means your life insurance works with your retirement planning, tax strategy, and investment management — not in isolation.

Next Steps

If you are not sure whether your current coverage is right, book a free 15-minute call to talk through your situation. I will give you an honest assessment — and if you are already well-covered, I will tell you that too.

Related reading: Corporate Life Insurance Strategy for Ontario Business Owners, How Much Does a Financial Advisor Cost?, and Do You Actually Need a Financial Advisor?. Take the Retirement Readiness Quiz or learn more about working with a financial advisor in London, Ontario.