Canadians now have a record $6 trillion in life insurance coverage across about 23 million policyholders, according to data published in the Insurance Business of Canada. At first glance, that number may sound reassuring. However, when compared with the amount households actually need to replace lost income, cover debts and protect loved ones, a significant gap remains.
A new study from Toronto-based MyChoice, using data from Statistics Canada, CMHC and CLHIA, found that the average Canadian household should have about $595,000 in life insurance coverage. Instead, the average household holds roughly $509,000, leaving a shortfall of 14.5%.
Canada’s Life Insurance Gap Is Growing
The issue is not that Canadians are avoiding life insurance. In fact, total coverage is rising nationally.
The real problem is that many policies were purchased years ago, when mortgages were smaller, salaries were lower and household financial responsibilities looked very different.
As home prices, mortgage balances, consumer debt and incomes have increased, many existing policies have not been updated to match today’s needs.
With more than 1.2 million mortgages set to renew this year, the mismatch between insurance coverage and financial obligations is becoming harder for households to ignore.
Why Record Coverage Can Still Hide a Shortfall
Although Canada’s total life insurance coverage has reached a record level, many households remain underinsured because life insurance is often purchased at one specific moment in time.
Vitalii Starov, vice-president of product growth at MyChoice, said much of Canada’s life insurance coverage was locked in years ago.
Since then, many Canadians have taken on larger mortgages, higher consumer debt and bigger income-replacement needs.
MyChoice’s analysis found that mortgage debt now accounts for about three-quarters of total household debt in Canada.
That means a life insurance policy that once covered a household’s mortgage may no longer be enough today.
Ontario Has the Largest Life Insurance Shortfall
Ontario has the widest coverage gap in the country.
According to the study, Ontario households need close to $794,000 in life insurance coverage but hold only about $552,000 on average. That creates a shortfall of more than 30%.
The next largest gaps are in:
| Province | Estimated Coverage Gap |
|---|---|
| Ontario | More than 30% |
| Quebec | About 25% |
| Alberta | About 21% |
| British Columbia | Just over 16% |
Despite high housing costs, British Columbia’s underinsurance gap is smaller than Ontario’s. Meanwhile, Manitoba and Nova Scotia are closer to balanced, with average coverage roughly matching estimated household needs.
Why Ontario’s Gap Is So Large
Starov said Ontario’s shortfall is mainly linked to the province’s high average mortgage balances.
The issue is intensified by rising non-mortgage debt and higher average salaries, both of which increase the amount of income protection a household may need.
For families in the Greater Toronto Area or Ottawa carrying large mortgages, the coverage gap can have major consequences. In the event of an unexpected death, the difference between enough insurance and too little insurance could determine whether a family can stay in its home or is forced to sell.
Mortgage Renewals Make This an Important Time to Review Coverage
More than 1.2 million Canadian mortgages were renewed in 2025, and the renewal wave is expected to continue into 2026.
For homeowners who bought life insurance when their mortgage balance or income was lower, renewal can be a useful reminder to review coverage.
A policy that seemed sufficient years ago may now fall short because the household’s debt, income and expenses have changed.
Life Insurance Still Plays a Major Role for Families
Canada’s life and health insurers paid out $18.6 billion in life insurance benefits in 2024.
That amount included $8.9 billion in death benefits.
Life insurance remains one of the most direct ways to prevent a mortgage or other debt from becoming an overwhelming burden for surviving family members.
How to Know Whether Your Life Insurance Is Enough
The best way to measure coverage is to start with the numbers, not the monthly premium.
A household should add together:
- Outstanding mortgage balance
- Other debts
- Five to 10 years of income replacement
- Future family obligations
- Existing life insurance death benefit
For example, a homeowner with a $550,000 mortgage, $30,000 in consumer debt and annual household income of $90,000 may reasonably need five to 10 years of income replacement.
Once mortgage debt and other obligations are included, that household’s total life insurance need could exceed $900,000.
In that situation, a $500,000 policy that once seemed generous may now cover barely half of what the family actually needs.
Reviewing a Policy Does Not Always Mean Buying a New One
If a life insurance policy has not been reviewed in three years or more, a review may be the right first step.
That does not automatically mean a household needs to buy a new policy.
In some cases, families may be able to reduce the gap by changing coverage between partners, adjusting the policy term or comparing available options through a licensed broker.
The goal is not always to buy the largest policy possible. The goal is to make sure the policy matches the size of the household’s financial obligations.
Employer Life Insurance May Not Be Enough
Many Canadians rely partly on employer group life insurance.
However, employer coverage usually ends when a person leaves the job.
This can create a serious gap if a household has not built enough personal life insurance coverage outside work.
The national average of $509,000 in personal coverage may not be enough for families with large mortgages, children, debts or long-term income needs.
Online Insurance Options Are Changing the Market
Traditional life insurance is no longer the only option for Canadians comparing coverage.
Online providers and digital application tools can make it easier to compare quotes, estimate needs and apply for term life insurance.
Some providers advertise term life policies with coverage up to several million dollars and flexible terms ranging from 10 to 30 years. Many online applications also offer quick quotes and may not require medical exams for most applicants.
However, households should compare options carefully and make sure the coverage amount, term length and premium fit their actual financial needs.
What Canadians Should Do Now
Canadians who may be underinsured should begin with a simple coverage review.
First, add up the mortgage balance, other debts and five to 10 years of income replacement. Then compare that number with the current policy’s death benefit.
A review is especially important after:
- A mortgage renewal
- A salary increase
- A new child
- A job change
- A major debt increase
- A change in household expenses
If the numbers show a shortfall, comparing quotes through a licensed broker or insurer can help determine how affordable it may be to close the gap.
