The easy part of buying life insurance is knowing that you want to protect your family financially. What isn’t so easy—at least at first? Figuring out how much coverage you actually need.
After all, if you underestimate your needs and buy too little coverage, you’ll end up leaving your family in a financial pinch if you die while they still depend on your income. On the other hand, if you overestimate your needs and buy too much coverage, you’ll end up paying your insurer more than you need to (and sending their kids to Disney World instead of yours).
So whether you’re just starting to look into life insurance or are ready to buy a policy, it’s important to know how much coverage you truly need and what this coverage will cost you. This way, you’ll know that you’re giving your family the protection they need and deserve without padding your insurer’s pockets unnecessarily.
But how do you actually do this? Use PolicyMe’s free life insurance calculator and the tips we share below to calculate the cost of a policy based on your needs.
How to use our life insurance calculator
Our online life insurance calculator helps you estimate the cost of a life insurance policy based on your personal characteristics and coverage needs. Here’s how to use it.
Step 1: Enter your age
When you buy a policy, insurers look at your age to estimate the likelihood that you’ll die during your policy. You’re more likely to die when you’re older rather than younger. So if you buy a policy when you’re 40 instead of when you’re 25, your chance of dying during the policy will be higher and your insurer will charge more for the policy.
Step 2: Enter your gender
Like with age, insurers look at gender when assessing your risk of dying early. Men are more likely than women to die at a younger age, so they tend to pay higher premiums. Sorry, guys!
Step 3: Enter your smoking status
Insurance companies also consider your smoking status when you buy life insurance. Smokers are more likely to die early than non-smokers. So if you smoke, you’ll pay a higher price for life insurance.
Step 4: Choose your coverage amount and term length
Now that you’ve entered your basic personal information, it’s time to specify the amount of coverage you need and how long you need it for. Both of these factors will influence the estimated cost of your policy.
Specifically, if you want your insurer to pay out a larger death benefit if you die while holding your policy, you’ll have to pay higher premiums. Shocker, right?
And if you want coverage for longer (e.g., 30 years instead of 10 years), there’s a higher chance that you’ll die while holding your policy. How do insurers cover their backs and compensate for this greater risk? By charging you more for coverage.
Step 5: Get your quotes
After you complete Steps 1–4, you’ll get quotes from some of Canada’s best insurers for the type of policy you specified in Step 4.
Of course, the final cost of your policy will depend on additional information about your health and lifestyle. So it could end up being higher or lower than the initial quote. But the estimates you’ll get from our calculator will give you a general idea of how much a policy will cost you.
What coverage amount and policy length do I need?
When you’re using our life insurance calculator, entering your age, gender, and smoking status should be pretty easy peasy. But specifying your coverage amount and policy length may be trickier if you don’t know how much coverage your family needs.
Most people select their coverage amount and policy length based on the expenses they’d pay to support their family financially until their kids are out of the house and they’ve paid off their mortgage. But you might need more coverage or a longer policy length depending on your needs. For example, if you have a child with special needs, you might want to be able to cover their financial needs beyond age 18.
Need some more help with figuring out how much coverage your particular family needs? Use our 5-minute online life insurance checkup to identify the coverage amount and policy length that’s right for your family. Complete the checkup for free here.
How to choose a life insurance company
In Step 5 of our life insurance calculator, you’ll get quotes for a policy from several top Canadian insurers. But how are you supposed to know which one to choose? Consider these 3 factors:
You buy life insurance to reduce the risk that your family will struggle financially if you die early and they lose access to your income. So the last thing you want is to buy a policy from an insurer that could go out of business during your policy and leave your family high and dry.
Fortunately, because the insurance industry is highly regulated in Canada, most insurers are in excellent financial shape. So you generally don’t have to worry about buying a policy from an insurer that’s secretly on the verge of bankruptcy.
Electronic life insurance applications aren’t just quicker to fill out. They also help you get coverage faster. That’s because submitting a paper application can increase your application’s processing time by a whopping 6–8 weeks! So when you’re shopping around for life insurance, look for a company that offers e-applications.
You’ve probably learned to be skeptical about the lowest price on the table. Sure, you’d love to save some money. But you also know that there’s often a reason for a lower price, and it might not be a good one.
The good news is that with life insurance, a lower price usually just means that a company is pricing a policy more competitively to win you over as a customer. So as long as the policy fits your coverage needs, we typically recommend going with the lowest quote you get.
Ready to find out how much a life insurance policy will cost you?