How the calculator works (detailed)

Option A — Coverage Needs (what the formula does)

Formula:
Coverage = (Annual Income × Years of Financial Support Needed) + Debts + Final Expenses − Savings

Explanation for a newcomer: This method estimates how much money your family would need to replace your income for a certain number of years (for example, until children are financially independent). It adds one-time obligations (debts and final expenses) and subtracts the assets you already have. It is a plain needs-analysis (not an actuarial calculation) designed to provide a starting point for planning.

Why use this approach?

It’s a practical, easy-to-understand method used by many financial planners to produce a quick estimate. It helps prioritize coverage to protect day-to-day living costs and outstanding obligations.

Limitations

• This estimate does not consider inflation, taxes, investment returns, or changing future expenses unless you manually adjust inputs.
• It is not a substitute for personalized financial advice. Use it as an educational guide.
• No mortality table or actuarial pricing is used for this calculation — it is purely financial needs estimation.

Option B — Premium Estimate (how the estimate is derived)

Formula (simplified):
Premium ≈ Coverage × BaseRate (where BaseRate is adjusted for age, gender, term, and health)

Explanation for a newcomer: Insurers set premiums based on the applicant’s risk of dying during the policy term. This calculator uses a simplified base-rate factor (a demonstration approximation). It adjusts the base rate upward for older ages, for male gender (statistical mortality differences), and for below-average health.

Where the assumptions come from

The simplified rate logic is informed by publicly available industry factors and educational materials used by Canadian-life-insurance educators. Real underwriting uses many more inputs (medical history, smoking status, occupational hazards, medications, family history, etc.).

Mortality tables and actuarial basis

For compliance and actuarial pricing, Canadian insurers and actuaries rely on standard mortality studies and tables (examples include studies by the Canadian Institute of Actuaries). This simplified calculator does not perform actuarial pricing and does not use a specific mortality table directly — it only captures the idea that mortality risk increases with age and worse health.

Compliance statement (Canada)

Important: This tool provides educational illustrations only. It is not a binding quote, offer, or financial advice. Actual premiums and coverage decisions require full underwriting by licensed insurance companies and advice from a licensed insurance advisor or financial planner. For personalized advice, please contact a licensed representative in your province or territory.

References & standards: This content is written to be consistent with common Canadian practices and is designed to be clear and non-misleading. It is not intended to replace insurer documentation, policy contracts, or regulatory guidance from provincial regulators or federal bodies.