Here is a finding that sounds contradictory until you look at the cause. Canadians hold more life insurance than ever — roughly $6 trillion of coverage across 23 million people. And households are still, on average, underinsured by about 14.5% relative to what their obligations imply.
The gap is not spread evenly. Ontario households have the widest shortfall in the country, at over 30%. Alberta sits around 21%, British Columbia just over 16%.
Why Ontario is worst
Mortgages. Ontario carries the highest average mortgage balances in Canada, and coverage has not kept pace with them. A household with a seven-figure mortgage in the GTA or Ottawa needs substantially more protection than the national average implies, and a policy bought when they had a $300,000 mortgage does not provide it.
That shortfall is not abstract. It is the difference between a family staying in the home and having to sell it in the year they lose a parent.
The real cause is not reluctance
People assume the gap exists because Canadians refuse to buy insurance. Mostly they have bought it. The problem is that life insurance gets treated as a set-and-forget decision.
A policy is arranged at one moment — a first home, a first child — and then left untouched for a decade while:
- the mortgage is refinanced upward for a renovation
- a second child arrives
- the family moves to a more expensive house
- income rises, and the standard of living the family would need to maintain rises with it
- a business starts, sometimes with personally guaranteed debt
Each of those raises the coverage needed. None of them prompts anyone to call their advisor.
A five-minute check
Work out the number rather than guessing at it:
- Current mortgage balance — the actual figure, not what you borrowed originally.
- Plus other debts — car loans, lines of credit, credit cards, anything personally guaranteed.
- Plus income replacement — your annual income multiplied by the years your family would genuinely need support.
- Plus future costs you intend to cover — education, childcare if a stay-at-home parent died.
- Minus existing coverage — group life through work, plus any personal policies.
What remains is the gap. There is a calculator on the life insurance page that does the arithmetic and shows the breakdown.
Two things that quietly make the gap worse
Group coverage counted as though it were permanent. Employer life insurance is typically one or two times salary, and it ends when the job does. Counting it as part of your protection is reasonable; counting on it being there in ten years is not.
Declining creditor insurance counted at its original value. If your mortgage protection came from the lender, the benefit shrinks as the balance falls — while the premium generally does not. Someone eighteen years into a mortgage may be paying the same for a fraction of the coverage they think they have.
Mortgage renewal. You already have the numbers in front of you, you know the current balance, and if you are switching lenders it matters doubly — creditor insurance generally ends when you move, and you would have to requalify at your current age and health.
What to do about a gap
Usually less dramatic than people fear. Term insurance is priced far lower than most people estimate, and topping up existing coverage with an additional term policy is straightforward if you are in reasonable health.
Two rules if you are making changes. Never cancel existing coverage until the replacement is issued and in force — approval is not the same as active. And if your health has changed since you bought your current policy, that policy is more valuable than it looks; check whether it has a conversion privilege before doing anything with it.
If you would like the gap calculated against your actual numbers, that takes about twenty minutes and costs nothing.