Despite record-high life insurance coverage, many Canadian households remain underinsured, leaving families exposed to rising debt and housing costs, according to new research from Toronto-based MyChoice.
The study found that household nationwide hold an average of $509,000 in life insurance, falling short of the $595,000 estimated as necessary to replace income and cover debts in the event of a death. Ontario showed the largest gap, with households needing neary $794,000 but holding only $552,000, a shoftfall of more than 30%. Meanwhile, Alberta and Quebec follow at 21% and 25%, while British Columbia is underinsured by just over 16%.
“Nationally, the total amount of life insurance coverage has increased, but much of that coverage was locked in years ago," said Vitalii Starov, MyChoice's VP of product growth. "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.”
Mortgage debt now accounts for roughly three-quarters of total household debt, the analysis showed. As a result, unexpected income loss can jeopardize housing stability, retirement savings and education plans, particularly for younger families who entered the market with large mortgages and thinner savings buffers.
Behavioral factors driving underinsurance
According to the study, many Canadians treat life insurance as a “set-and-forget” product, failing to review coverage after major life events such as marriage, childbirth, career changes, or home purchases. This misalignment can leave policies insufficient when financial obligations grow.
Experts said reassessing coverage doesn’t always mean higher premiums. Adjusting term lengths, reallocating coverage between partners, or updating policy types can meaningfully reduce risk without a large cost increase. Comparison shopping is also recommended, as underwriting standards and pricing vary widely across insurers.
"Many Canadians believe they're adequately insured. But the numbers simply don't support that claim," said MyChoice CEO Aren Mirzaian. "Reviewing your life insurance isn't optional anymore, it's a critical pillar of long-term financial stability."
The finding also signalled opportunities for Canadian insurers to target households whose coverage has not kept pace with debt and income growth. Product innovation, policy review campaigns and educational outreach could address gaps while supporting long-term household resilience, the report said.
