Jul 22, 2026
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Canada carries more life insurance than ever. Total household coverage has reached record levels, and as homeownership rates climb and net worth increases, so does total coverage. But a closer look at the numbers reveals a problem growing quietly beneath that headline figure: millions of Canadians are holding policies that no longer match their actual financial exposure.
According to the 2023 Canadian Insurance Barometer Study conducted by LIMRA and Life Happens, 31% of Canadian adults — 8.4 million people — say they need or need more life insurance coverage. A separate analysis by Toronto-based firm MyChoice found that the average Canadian household carries roughly $509,000 in coverage against an estimated need of $595,000, a national shortfall of $86,000.
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Ontario households face the steepest gap. MyChoice’s data shows Ontario families need close to $794,000 in coverage but hold an average of just $552,000 — a shortfall exceeding 30%, or roughly $242,000. Alberta and Quebec follow with gaps of 21% and 25% respectively. British Columbia households are underinsured by just over 16%.
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The core reason is timing. Most life insurance policies are purchased once and then left unchanged — but household debt has not stood still.
Protect your income, whatever life throws at you. A serious diagnosis or unexpected injury shouldn't put your life on hold. To help, compare disability or critical illness coverage from insurance providers. Or use the free, no-obligation, online tool from PolicyMe. Just answer a few simple questions, and PolicyMe will provide you with an instant, no-obligation quote for either critical illness, disability or life insurance. Compare quotes online with PolicyMe
Why your existing policy may no longer be enough
“Nationally, the total amount of life insurance coverage has increased, but much of that coverage was locked in years ago,” said Vitalii Starov, vice-president of product growth at MyChoice. “Since then, mortgage balances have increased, consumer debt has risen, and average salaries are higher, all of which materially change how much protection a household actually needs.”
A study published in Insurance Business Magazine, which drew on provincial data from Statistics Canada, the Canada Mortgage and Housing Corporation (CMHC) and the Canadian Life and Health Insurance Association (CLHIA), found that mortgage debt now accounts for roughly three-quarters of total household debt. That concentration matters: unexpected income loss does not just threaten monthly cash flow — it puts housing, retirement savings and education plans directly at risk.
Life insurance is often treated as a “set-and-forget” product, Starov noted. Policies are bought at a single point in time, then left unchanged as households take on more debt, have more children, change jobs or see incomes rise significantly. The result is coverage that quietly falls behind real financial obligations, without any obvious warning.
It can be overwhelming trying to balance the right coverage and a manageable premium. But it doesn't have to be complicated. An easy way to compare premiums is to shop online. For instance, BlueCross can help protect what matters most with coverage starting at $15 per month. Blue Cross Life offers flexible term options (ranging from 10 to 30 years) with pricing that’s on par or better than digital insurers — and lower than most traditional providers. Use their 100% online application to get approved in just 20 minutes, usually without a medical exam.
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The mortgage debt trap: how rising balances created a hidden shortfall
The timing problem is most acute for households that entered the housing market in recent years. A family that bought a home in 2020 or 2021 likely purchased a policy — or updated an existing one — based on the debt levels, income and family circumstances of that moment. Several years later, none of those numbers may look the same.
Mortgage balances in Ontario, Alberta and British Columbia have grown substantially over that period. But because life insurance policies do not automatically adjust, the coverage gap widens each time a mortgage renewal increases the outstanding balance or a second property is purchased.
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For younger families, the exposure is sharper still. Those who entered the market with large mortgages and thinner savings buffers have less financial slack if a primary income earner dies. Without adequate coverage, families in that position may be forced to sell assets, divert retirement savings or take on additional debt to cover day-to-day costs and existing obligations.
Protect yourself and your loved ones. A serious diagnosis or unexpected injury shouldn't put your life on hold. To help, compare disability or critical illness coverage from insurance providers. Or use the free, no-obligation, online tool from PolicyAdvisor. Instantly compare critical illness and disability quotes from Canada’s top insurance providers and find the right safety net for your budget. Compare quotes online with PolicyAdvisor
Does your employer group plan cover the gap?
A common assumption among working Canadians is that employer-provided group life insurance fills the coverage gap. In most cases, it does not.
Group life benefits are typically set at one to two times base salary. For a household earning $100,000 per year, that means $100,000 to $200,000 in coverage — well below the national estimated need of $595,000 and far below the $794,000 threshold identified for Ontario families.
Group coverage also has practical limitations. It is tied to employment, meaning coverage ends when a job ends. Portability options exist, but converting group coverage to an individual policy typically happens at higher premiums and without the underwriting advantages available when a person is younger and healthier.
Employer benefits should be considered a starting point for life insurance planning, not the end of it.
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What underinsurance actually costs — and who it falls on
The LIMRA data puts the human dimension of the coverage gap in sharp relief. Among Canadians who identified a life insurance shortfall, 4 in 10 said their families would face financial hardship within six months should the primary wage earner die unexpectedly. Another quarter said they did not know how long their families would remain financially stable.
The financial consequences compound quickly in households already stretched by higher interest rates and living costs. Without enough coverage, families may be forced to sell assets, divert savings or take on additional debt just to cover everyday expenses and existing obligations.
Awareness alone is not solving the problem. The LIMRA study found more than half of Canadians (53%) say they have not purchased the coverage they know they need because they believe it is too expensive. A third cited other financial priorities as the barrier.
How to close your coverage gap without necessarily paying more
Reviewing a life insurance policy does not always lead to higher premiums. Some experts suggest that many households can meaningfully reduce their exposure by restructuring existing coverage rather than purchasing a new policy.
For households that do need to increase coverage, the DIME method — Debt, Income, Mortgage, Education — offers a structured starting point for calculating real coverage needs. Adding up outstanding debts, the number of years of income replacement required, the remaining mortgage balance and estimated post-secondary education costs for dependents provides a more accurate target than a salary multiple alone.
Underwriting standards and pricing vary widely across Canadian insurers, which makes comparison shopping practical and worthwhile. Rate differences between providers can be significant, particularly for applicants under 40. Reviewing coverage and getting at least three quotes before making a decision gives households the clearest picture of their actual options.
Ready for peace of mind? It’s worth considering how your family would manage without you around. To get a clear picture use a quick online calculator to estimate your actual coverage needs and see how a tailored life insurance policy can give you peace of mind and comfortably fit your budget. For instance, in just a few minutes you can get a free, no-obligation online quote with PolicyMe. Get coverage from the comfort of your home with PolicyMe’s instant online decision — making it easier to secure your financial safety net.
What to do now
- Use the DIME method (Debt, Income, Mortgage, Education) to calculate your real coverage need — not just a salary multiple
- Review your policy if you have bought a home, had a child or changed jobs since you last applied for coverage
- Check whether employer group life coverage (typically one to two times salary) accounts for the full gap — in most cases, it does not
- Compare your current coverage amount to your current mortgage balance, not the one you held when you bought the policy
- Get at least three term life quotes — pricing and underwriting vary significantly across Canadian insurers, particularly for applicants under 40
- If cost is a barrier, ask about reallocating coverage between partners or adjusting term lengths before purchasing additional coverage
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Sandra MacGregor has been writing about finance and travel for nearly a decade. Her work has appeared in a variety of publications like the New York Times, the UK Telegraph, the Washington Post, Forbes.com and the Toronto Star.
