Most Canadians Are Underinsured by 14.5%, Amid Soaring Household Debt
Canada’s financial vulnerability continues to deepen as household debt stays elevated, real estate remains historically expensive, and savings growth fails to keep pace with rising liabilities. In 2025, Canadian households carried a staggering $3.07 trillion in debt, marking the 15th consecutive year we lead the G7 in this metric.
At MyChoice, a Toronto-based, industry-leading insurtech company, we became interested in this troubling trend and wanted to explore whether Canadian families have enough life insurance coverage for their income, debt, and savings situation.
On paper, the numbers look reassuring. Canadians now report $5.8 trillion in life insurance coverage, 22 million policyholders nationwide, and an average household protection level of $509,000. But those headlines can be dangerously misleading because the real question is: Is that enough?
Methodology
To estimate how much life insurance Canadian households should carry in 2025, we analyzed the latest publicly available provincial-level data on household income, mortgage and non-mortgage debt, pension and non-pension assets from Statistics Canada and CMHC. For each province, we applied the formula: (household income × 7 years) + mortgage debt + non-mortgage debt – pension assets – non-pension assets to derive a “recommended coverage” value. We then compared that benchmark to the actual average life insurance coverage per household reported by the Canadian Life and Health Insurance Association (CLHIA) for insured households by province, highlighting the percentage gap between the recommended and actual coverage.
Key Findings
- Even though incomes are going up, Canadians in Ontario, Alberta, British Columbia, Quebec, and much of Atlantic Canada are under-insured at record levels. For many of these households, largely unbeknownst to them, debts are growing faster than assets, putting their families at great financial risk.
- Ontario has the most significant coverage shortfall. Households need about $794,400 in life insurance coverage but hold an average of $552,000, leaving a 30.5% gap.
- Even in Alberta, which has the highest average household income of any province, there’s a sizeable under-insurance gap of 21.3%.
- The gap in Quebec now stands at 24.6%, helped along by sluggish growth in assets and continued increases in household debt.
- Households in British Columbia require approximately $645,800 in life insurance coverage but hold an average of $541,000, leaving a 16.2% underinsurance gap.
- In Atlantic Canada, New Brunswick shows a gap of 17.6%. The gap is 15.8% in Newfoundland & Labrador. Larger gaps are seen in regions with lower household incomes indicating increased economic risk.
- Similarly, Manitoba is more or less in balance with Nova Scotia; Manitoba has a slight gap of 1.6% and Nova Scotia is only a 0.4% gap. The amount of life insurance people have is close to meeting recommended levels.
- The national average recommended coverage is $595,000, while actual coverage is $509,000, which equates to a nationwide insurance protection gap of 14.5% throughout Canada.
What This Means for Canadians
“This year’s data shows a widening protection gap,” says Aren Mirzaian, CEO of MyChoice. “Many Canadians believe they’re adequately insured, but the numbers simply don’t support that claim. With rising household debt and other pressures, such as a softening job market, the average household is now further from sufficient coverage than it was even five years ago. Reviewing your life insurance isn’t optional anymore, it’s a critical pillar of long-term financial stability.“
For many Canadians, a single unexpected death could jeopardize:
- Mortgages account for around three-quarters of Canadians’ total household debt, according to the Canada Mortgage and Housing Corporation.
- Their children’s education. Insufficient coverage means families may be forced to reallocate savings or delay tuition payments.
- As a result, households’ savings cushions will be much smaller over time, particularly if debt grows faster than savings.
- Need to pay off debt? This will take the focus off building up assets for your retirement.
- Large consumer and mortgage debt means Canadians are less resilient to unexpected income shocks.
Life insurance is no longer the supplemental benefit at work or an extra benefit but has become a keystone of any good financial plan. In today’s environment, households are more vulnerable than ever.
Raw Data:
| Province | Average Household Income Before Taxes ($) | Average Mortgage Debt Value ($) | Average Non-Mortgage Debt ($) | Average Pension Assets Value ($) | Average Non-Pension Assets Value ($) | Approximate Coverage Needed ($) |
|---|---|---|---|---|---|---|
| British Columbia | 124,700 | 261,600 | 49,700 | 354,400 | 184,000 | 645,800 |
| Alberta | 137,800 | 267,900 | 51,200 | 343,000 | 170,200 | 770,500 |
| Ontario | 129,200 | 383,300 | 49,400 | 367,900 | 174,800 | 794,400 |
| Saskatchewan | 111,600 | 151,900 | 41,700 | 349,600 | 128,000 | 497,200 |
| Newfoundland and Labrador | 104,700 | 178,200 | 35,100 | 390,900 | 105,200 | 450,100 |
| Quebec | 105,400 | 219,300 | 29,300 | 315,800 | 121,300 | 549,300 |
| Manitoba | 107,900 | 208,300 | 35,400 | 364,300 | 118,400 | 516,300 |
| Prince Edward Island | 100,300 | 183,200 | 34,800 | 327,100 | 81,900 | 511,100 |
| New Brunswick | 95,100 | 133,800 | 42,700 | 303,000 | 62,200 | 477,000 |
| Nova Scotia | 99,100 | 122,400 | 35,200 | 387,100 | 93,800 | 370,400 |
| National Average | 120,400 | 211,500 | 43,500 | 349,000 | 153,800 | 595,000 |
Sources: CMHC, Statistics Canada
We followed this procedure to determine the amount of life insurance coverage we recommend.
Approximate Coverage Needed = (household income * 7 years) + average mortgage debt + average non-mortgage debt – pension assets – non-pension assets
We then multiplied household income by 7, to calculate the level of protection. This is a standard recommendation to insure the loss of income for seven years and give the family an adequate amount of time to adjust to such an event.
Average mortgage and non-mortgage debt: This includes all major liabilities like mortgages, credit cards, loans, and lines of credit that a household may carry. Including these debts helps to ensure the life insurance coverage can settle these obligations.
Pension assets include registered savings vehicles such as RRSPs, RRIFs, and EPPs, whereas non-pension assets would be savings/investment vehicles not part of a pension, such as TFSAs, stocks, bonds, mutual funds, etc.
| Province | Approximate Coverage Needed ($) | Average protection per insured household ($) | Coverage Gap % |
|---|---|---|---|
| British Columbia | 645,800 | 541,000 | 16.2% |
| Alberta | 770,500 | 606,000 | 21.3% |
| Ontario | 794,400 | 552,000 | 30.5% |
| Saskatchewan | 497,200 | 529,000 | -6.4% |
| Newfoundland and Labrador | 450,100 | 379,000 | 15.8% |
| Quebec | 549,300 | 414,000 | 24.6% |
| Manitoba | 516,300 | 508,000 | 1.6% |
| Prince Edward Island | 511,100 | 447,000 | 12.5% |
| New Brunswick | 477,000 | 393,000 | 17.6% |
| Nova Scotia | 370,400 | 369,000 | 0.4% |
| National Average | 595,000 | 509,000 | 14.5% |
Sources: MyChoice, Canadian Life and Health Insurance Association