Life insurance: how much, how long, and when to stop
Life insurance is sold as a permanent fixture and is usually needed as a temporary one. The need has a clear shape over a lifetime, and recognising the shape answers both the "how much" and the "how long" questions at once.
What it is actually replacing
Life insurance exists to replace economic contribution that someone else was depending on. That covers income, and it also covers unpaid work — childcare a surviving partner would otherwise have to buy — plus specific obligations like a mortgage or a child’s education.
It follows that someone with no dependants and no debts has, in the strict sense, no income to replace. There can still be reasons to hold a policy — estate liquidity, a specific bequest — but they are different reasons, and they call for a different product and a different amount.
Sizing it without a rule of thumb
The multiple-of-salary rules are quick and blunt. A more direct approach is to total what a survivor would need — remaining income replacement, debts to clear, education to fund — and subtract what already exists: current savings, existing group coverage, and the survivor’s own earning capacity.
The subtraction is the part people skip, and it is why coverage often outlives its purpose. Every year of successful saving reduces the gap the policy is filling.
Term versus permanent
Term insurance covers a fixed period for a comparatively small premium, and pays nothing if you outlive it — which is the intended outcome. Permanent insurance covers whenever death occurs and accumulates a cash value, at a substantially higher premium.
The honest comparison is not "term wastes money" versus "permanent builds value". It is whether the need is temporary or permanent. A temporary need met with permanent insurance overpays for decades; a genuinely permanent need — an estate tax liability that will exist whenever death occurs — met with term coverage that expires first is not covered at all.
Where their need went
Dan & Marie — 58 and 56, Alberta. Dan retires at 62 with a defined-benefit pension; Marie retires at 60. Their RRSPs are very different sizes, which matters later.
Dan earns $132,000 and the household spends $96,000 a year. In their thirties, losing that income would have been catastrophic — decades of earnings gone, a mortgage outstanding, children at home. The case for coverage was overwhelming.
Today, at the point Dan retires at 62, the household holds $1,315,892. The salary is about to stop by choice, the assets are in place, and both spouses have their own benefits. The thing insurance was replacing no longer exists.
One residual exposure remains, and it is worth naming: when Dan dies, his OAS of about $8,560 stops and the split ends. That is a real income reduction for the survivor — but it is a known, modest, permanent one, which is a very different problem from replacing a career.
The one thing worth checking now
Group coverage through an employer usually ends when the employment does. Anyone whose entire coverage is a group policy has coverage that expires on the day they retire or change jobs — which is fine if the need also ended, and a problem if it did not.
The insurance section holds term, permanent and disability policies with their premiums and coverage, so premiums reduce cash flow while working and any payout appears where it would actually land.
Next: disability insurance, and the gap the self-employed sit in.
GlidePathEngine is an educational planning tool — not financial, investment, tax, or legal advice.