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More Canadians Have Life Insurance in 2026, Yet One in Four Still Doubt Their Coverage Is Enough
The woman who bought a $500,000 term policy in 2019 to cover her Toronto mortgage now owes $720,000. The policy never changed. The house did.
That gap explains something PolicyMe's 2026 Life Insurance Gap Report captures in a single number: 24% of Canadians do not believe their life insurance coverage is enough anymore. Overall ownership is up. So is the suspicion that the old math no longer works.
Part of the problem is arithmetic. Part is illusion.
The illusion of coverage
Most people who think they are covered through work are half right. Group benefits at large employers typically offer life insurance equal to one or two times your annual salary. A professional earning $85,000 a year carries $170,000 in death benefit. That might settle final expenses and buy some time. It will not replace a decade of income for young children or pay off a $600,000 mortgage in the suburbs.
Worse, the coverage is not portable. You leave the job, you leave the policy. If you wait until your fifties to buy personal coverage, when your health has changed and premiums have doubled, the window for affordable term insurance may have already closed.
So the confidence gap is partly an awareness gap. People are learning what they actually have versus what they thought they had.
The erosion nobody planned for
The other driver is inflation's quiet effect on fixed coverage amounts. A $500,000 policy bought in 2019, when the average Canadian home price sat around $480,000, felt adequate. By 2026, the average price had pushed past $700,000 in major markets. The policy stayed the same. The target moved.
Household debt levels compound the problem. According to Statistics Canada, Canadian household debt remains elevated through 2025 and into 2026, with mortgage debt representing roughly 75% of total household credit. The cushion a family needs from a life insurance payout has grown larger than it was a decade ago, but most policyholders never adjusted their coverage to match. You buy it once, at a fixed premium for a fixed term, usually 10 or 20 years. You do not think about it again unless something forces you to. A child. A divorce. A diagnosis. The price of the house next door.
The mortgage insurance trap
Many Canadians think they solved this problem by accepting mortgage insurance from their lender when they bought the house. Mortgage insurance names the bank as the beneficiary. If you die, the bank gets paid. Your family gets nothing, and they still have to figure out rent.
An individual term life policy, by contrast, pays your family directly. They can use the money to pay off the mortgage, or keep the mortgage and use the death benefit for living expenses, tuition, or to move somewhere cheaper. The flexibility matters more than the coverage amount in some cases.
The Financial Consumer Agency of Canada frames life insurance as income replacement, not just debt coverage. That means your policy should cover outstanding liabilities plus the future earnings your dependents would lose. For a 38-year-old parent with two school-age children, that figure can easily reach seven figures. A $50,000 simplified-issue policy, the kind you can get without a medical exam, leaves that gap unclosed.
The correction is simpler than it looks
You do not need to replace your work policy. You layer a personal term policy on top of it. A healthy 35-year-old non-smoker can often secure $500,000 in 20-year term coverage for less than $50 a month, far below what most Canadians estimate when guessing at premium costs.
The confidence gap the study identifies is a signal. Treat it like a smoke detector, not a fire. Run the numbers. Compare your current death benefit against your mortgage, your income, your dependents' needs over the next decade. If the gap is real, close it while you are still healthy and premiums are still low.
Because the policy you bought when rates were 1.79% does not know the renewal came in at 5.4%. It just sits there, same as it ever was, waiting for a moment you hope never comes.
The woman who bought a $500,000 term policy in 2019 to cover her Toronto mortgage now owes $720,000. The policy never changed. The house did.
That gap explains something PolicyMe's 2026 Life Insurance Gap Report captures in a single number: 24% of Canadians do not believe their life insurance coverage is enough anymore. Overall ownership is up. So is the suspicion that the old math no longer works.
Part of the problem is arithmetic. Part is illusion.
The illusion of coverage
Most people who think they are covered through work are half right. Group benefits at large employers typically offer life insurance equal to one or two times your annual salary. A professional earning $85,000 a year carries $170,000 in death benefit. That might settle final expenses and buy some time. It will not replace a decade of income for young children or pay off a $600,000 mortgage in the suburbs.
Worse, the coverage is not portable. You leave the job, you leave the policy. If you wait until your fifties to buy personal coverage, when your health has changed and premiums have doubled, the window for affordable term insurance may have already closed.
So the confidence gap is partly an awareness gap. People are learning what they actually have versus what they thought they had.
The erosion nobody planned for
The other driver is inflation's quiet effect on fixed coverage amounts. A $500,000 policy bought in 2019, when the average Canadian home price sat around $480,000, felt adequate. By 2026, the average price had pushed past $700,000 in major markets. The policy stayed the same. The target moved.
Household debt levels compound the problem. According to Statistics Canada, Canadian household debt remains elevated through 2025 and into 2026, with mortgage debt representing roughly 75% of total household credit. The cushion a family needs from a life insurance payout has grown larger than it was a decade ago, but most policyholders never adjusted their coverage to match. You buy it once, at a fixed premium for a fixed term, usually 10 or 20 years. You do not think about it again unless something forces you to. A child. A divorce. A diagnosis. The price of the house next door.
The mortgage insurance trap
Many Canadians think they solved this problem by accepting mortgage insurance from their lender when they bought the house. Mortgage insurance names the bank as the beneficiary. If you die, the bank gets paid. Your family gets nothing, and they still have to figure out rent.
An individual term life policy, by contrast, pays your family directly. They can use the money to pay off the mortgage, or keep the mortgage and use the death benefit for living expenses, tuition, or to move somewhere cheaper. The flexibility matters more than the coverage amount in some cases.
The Financial Consumer Agency of Canada frames life insurance as income replacement, not just debt coverage. That means your policy should cover outstanding liabilities plus the future earnings your dependents would lose. For a 38-year-old parent with two school-age children, that figure can easily reach seven figures. A $50,000 simplified-issue policy, the kind you can get without a medical exam, leaves that gap unclosed.
The correction is simpler than it looks
You do not need to replace your work policy. You layer a personal term policy on top of it. A healthy 35-year-old non-smoker can often secure $500,000 in 20-year term coverage for less than $50 a month, far below what most Canadians estimate when guessing at premium costs.
The confidence gap the study identifies is a signal. Treat it like a smoke detector, not a fire. Run the numbers. Compare your current death benefit against your mortgage, your income, your dependents' needs over the next decade. If the gap is real, close it while you are still healthy and premiums are still low.
Because the policy you bought when rates were 1.79% does not know the renewal came in at 5.4%. It just sits there, same as it ever was, waiting for a moment you hope never comes.
Sources
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