24% of Canadians with Life Insurance Still Aren't Sure They're Covered Enough
A $500,000 policy purchased in 2019 no longer covers the same mortgage it did back then. The buying power of that death benefit has eroded sharply, which explains why a growing share of Canadians who already own life insurance still feel exposed.
PolicyMe's 2026 Life Insurance Gap Report found that while overall ownership rates have risen slightly year over year, 24% of policyholders lack confidence their coverage is adequate. The disconnect is clear: more people are buying policies, but the policies themselves haven't kept up with the cost of what they're meant to replace.
Why existing coverage falls short
Most Canadians with life insurance hold employer-sponsored group policies. These typically cap benefits at one to two times annual salary. A worker earning $75,000 gets $150,000 of coverage, enough to pay for a funeral and perhaps settle a few credit cards, but nowhere near the standard industry recommendation of five to ten times annual income.
The cap becomes a real problem when you add a mortgage. A household with a $600,000 mortgage balance and $150,000 of group coverage leaves a surviving spouse on the hook for $450,000 plus interest. A shortfall this large shows up the day the policy is issued, and most people don't realize it until they sit down to calculate replacement needs.
Group policies carry a second risk: they're not portable. The day you leave your job, the coverage ends. The "Great Reshuffle" since 2020 has made career switches more frequent, which means more Canadians are unknowingly cycling in and out of coverage windows. A personal term policy costs more per month, but it stays with you regardless of where you work.
The inflation-adjusted gap
Inflation has shifted the sufficiency threshold. The cost of a basic funeral service in Canada now runs around $7,800 to $8,000, up sharply from pre-pandemic figures. Housing costs have climbed even faster. A family that calculated adequate coverage in 2019 using a $450,000 mortgage balance might now owe $550,000 after refinancing at higher rates, or owe the same balance but face higher monthly carrying costs that require a larger income-replacement cushion.
PolicyMe's data shows that smaller death benefit policies increasingly fall short of covering even immediate estate costs and funeral expenses. That's the floor, not the target. For households with dependents, the gap widens considerably. A substantial share of Canadian households rely on a single income to pay primary housing costs. Lose that income, and the surviving spouse needs a death benefit large enough to either clear the mortgage entirely or replace the lost earnings long enough to pay it down.
What the 24% figure actually measures
The 24% confidence gap doesn't mean one in four Canadians is dramatically under-insured. Some of that group may have purchased a 10-year term policy five years ago and now realizes they need 20 years of coverage, not five. Others locked in coverage amounts when their children were young and haven't revisited the calculation now that the kids are in university.
But a meaningful share of the 24% is genuinely under-covered and knows it. They have a policy, they pay the premium, and they understand intellectually that the benefit wouldn't clear the mortgage or replace their income. They just haven't acted. The friction is usually cost, moving from a $150,000 group policy to a $500,000 personal term policy might add $60 to $120 per month depending on age and health, and that's a real line item in a household budget already stretched by housing and debt servicing.
The problem compounds over time. A 35-year-old who defers buying adequate coverage for five years hits age 40, when rates rise. That same $500,000 policy now costs 20% to 30% more. The delay becomes permanent.
For the quarter of Canadians who know they're exposed, the next step isn't complicated. Calculate what it would actually cost to clear the mortgage, cover funeral and estate costs, and replace income for a defined period. Get a quote for a 20- or 30-year term policy that matches that number. If the premium fits the budget, buy it. If it doesn't, you'll at least know the exact dollar amount you're short.
A $500,000 policy purchased in 2019 no longer covers the same mortgage it did back then. The buying power of that death benefit has eroded sharply, which explains why a growing share of Canadians who already own life insurance still feel exposed.
PolicyMe's 2026 Life Insurance Gap Report found that while overall ownership rates have risen slightly year over year, 24% of policyholders lack confidence their coverage is adequate. The disconnect is clear: more people are buying policies, but the policies themselves haven't kept up with the cost of what they're meant to replace.
Why existing coverage falls short
Most Canadians with life insurance hold employer-sponsored group policies. These typically cap benefits at one to two times annual salary. A worker earning $75,000 gets $150,000 of coverage, enough to pay for a funeral and perhaps settle a few credit cards, but nowhere near the standard industry recommendation of five to ten times annual income.
The cap becomes a real problem when you add a mortgage. A household with a $600,000 mortgage balance and $150,000 of group coverage leaves a surviving spouse on the hook for $450,000 plus interest. A shortfall this large shows up the day the policy is issued, and most people don't realize it until they sit down to calculate replacement needs.
Group policies carry a second risk: they're not portable. The day you leave your job, the coverage ends. The "Great Reshuffle" since 2020 has made career switches more frequent, which means more Canadians are unknowingly cycling in and out of coverage windows. A personal term policy costs more per month, but it stays with you regardless of where you work.
The inflation-adjusted gap
Inflation has shifted the sufficiency threshold. The cost of a basic funeral service in Canada now runs around $7,800 to $8,000, up sharply from pre-pandemic figures. Housing costs have climbed even faster. A family that calculated adequate coverage in 2019 using a $450,000 mortgage balance might now owe $550,000 after refinancing at higher rates, or owe the same balance but face higher monthly carrying costs that require a larger income-replacement cushion.
PolicyMe's data shows that smaller death benefit policies increasingly fall short of covering even immediate estate costs and funeral expenses. That's the floor, not the target. For households with dependents, the gap widens considerably. A substantial share of Canadian households rely on a single income to pay primary housing costs. Lose that income, and the surviving spouse needs a death benefit large enough to either clear the mortgage entirely or replace the lost earnings long enough to pay it down.
What the 24% figure actually measures
The 24% confidence gap doesn't mean one in four Canadians is dramatically under-insured. Some of that group may have purchased a 10-year term policy five years ago and now realizes they need 20 years of coverage, not five. Others locked in coverage amounts when their children were young and haven't revisited the calculation now that the kids are in university.
But a meaningful share of the 24% is genuinely under-covered and knows it. They have a policy, they pay the premium, and they understand intellectually that the benefit wouldn't clear the mortgage or replace their income. They just haven't acted. The friction is usually cost, moving from a $150,000 group policy to a $500,000 personal term policy might add $60 to $120 per month depending on age and health, and that's a real line item in a household budget already stretched by housing and debt servicing.
The problem compounds over time. A 35-year-old who defers buying adequate coverage for five years hits age 40, when rates rise. That same $500,000 policy now costs 20% to 30% more. The delay becomes permanent.
For the quarter of Canadians who know they're exposed, the next step isn't complicated. Calculate what it would actually cost to clear the mortgage, cover funeral and estate costs, and replace income for a defined period. Get a quote for a 20- or 30-year term policy that matches that number. If the premium fits the budget, buy it. If it doesn't, you'll at least know the exact dollar amount you're short.
Sources
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