Canada's Life Insurance Coverage Gap: The Real Data

Here is a number worth sitting with. When someone dies in Canada, the Canada Pension Plan pays a one time death benefit with a basic amount of $2,500. There is a possible top up of $2,500, but only in narrow cases where the person never received a CPP retirement or disability pension and left no eligible surviving spouse, to a maximum of $5,000 (Government of Canada, CPP death benefit).

That is the public backstop for final expenses. Everything past it comes from what a family already had in place. And that framing matters, because the life insurance coverage gap in Canada is not mainly a story about people owning nothing. It is a story about the distance between what is in force and what a household would actually need.

Canadians hold record coverage right now

The Canadian Life and Health Insurance Association's Canadian Life & Health Insurance Facts, 2025 Edition reports that 23 million Canadians own about $6 trillion in life insurance coverage. Average life insurance protection per insured household is $509,000, up from $483,000 in 2023, which CLHIA says approximates five times household income.

British Columbia sits a bit above that national average. The same 2025 factbook puts average protection per insured household in BC at $541,000, with a median policyholder age of 41.

Insurers paid out $18.6 billion in life insurance benefits in 2024, including $8.9 billion in death benefits, according to the same source. Sales are climbing too. LIMRA reported that Canadian individual life insurance new annualized premium hit $2.3 billion in 2025, up 9 per cent over 2024, with policies sold up 4 per cent (LIMRA, February 2026).

So where is the gap?

The gap lives in households, not in the national total

The most useful survey evidence comes from the Canadian Insurance Barometer Study by LIMRA and Life Happens. In its findings, 57 per cent of Canadian adults reported owning some form of life insurance, while 31 per cent, roughly 8.4 million adults, said they need coverage or need more of it (LIMRA, July 2024).

A few other findings from that release stand out:

• Four in ten Canadian families said they would face financial hardship within six months if the primary wage earner died unexpectedly.
• 53 per cent of those who know they need coverage said they haven't bought it because they think it costs too much, and 33 per cent pointed to other financial priorities.
• More than a third of Canadian adults overestimate the cost of life insurance by about three times.
• Only one in five feel very knowledgeable about life insurance.

That last pair is the interesting tension. A lot of the gap is driven by a price people have guessed at rather than a price they were quoted.

Why a $509,000 average can still leave a family short

Two things hide inside that average, and both cut against reading it as reassuring.

First, it is an average across insured households. Households carrying no coverage at all are not dragging it down, and a smaller number of very large policies pull it up. An average is not a median, and it is definitely not your number.

Second, a meaningful slice of the total is workplace coverage. CLHIA's 2025 factbook notes that individual life insurance now equals 66 per cent of the value of total policies in force, up from 59 per cent in 2014, driven primarily by term life. That leaves roughly a third of the coverage in force as group coverage, which generally ends when the job ends and usually is not portable on the same terms. A family can look well covered on paper right up until a layoff or a career change.

The other side of the ledger keeps growing

Coverage is only half the equation. Statistics Canada reported that household credit market debt reached 179.6 per cent of disposable income in the first quarter of 2026, which works out to roughly $1.80 of debt for every dollar of household disposable income, with total household credit market debt of $3,253.4 billion and 14.75 per cent of disposable income going to debt service (Statistics Canada, June 2026).

Mortgages carry most of that weight. CMHC's Residential Mortgage Industry Report, Spring 2026 edition, found that Canada's residential mortgage debt exceeded $2.4 trillion in December 2025, a new high, with an average mortgage payment of $1,852 in the fourth quarter of 2025 (CMHC, May 2026).

In Metro Vancouver, mortgage balances tend to run well above national norms. A household in Burnaby or Coquitlam carrying a large mortgage can hold BC's above average $541,000 of protection and still have very little left over once the mortgage is cleared.

What public benefits actually replace

This is where people are often surprised. As of April 2026, the CPP survivor's pension pays an average of $549.62 per month for recipients under 65, with a maximum of $803.54. For recipients 65 and over, the average is $339.36 with a maximum of $904.59. The children's benefit is $307.81 per month for a child under 18 or in full time studies (Government of Canada, CPP payment amounts).

Those amounts are real help. They are not an income replacement plan for a Metro Vancouver household.

What actually drives your number

Rules of thumb are a starting point, not an answer. The things that move a real calculation are specific:

• The outstanding mortgage balance and any other debt that would not disappear.
• How many years of income the surviving household would need, and at what level.
• Childcare and education costs, including any RESP contributions that would stop.
• Existing coverage, including group coverage you might lose, and any RRSP or TFSA savings that could be drawn on.
• Final expenses and taxes owing on the estate, which for many families is the piece nobody has priced out.
• What the surviving spouse's own earnings and CPP entitlement would realistically be.

What this doesn't tell you

Honest limits on everything above.

The CLHIA figures are industry aggregates. They describe averages and totals, not what any particular family in New Westminster or Burnaby holds, and CLHIA does not publish a median. The LIMRA Barometer numbers are self reported survey data, published in 2024 and based on fieldwork from the prior year, so respondents were estimating their own coverage and their own adequacy. People are not always accurate about either.

The Statistics Canada and CMHC debt figures are national. Regional balances in the Lower Mainland differ, sometimes substantially, and neither dataset tells you anything about a specific household's assets.

There is also genuine disagreement about how big the shortfall is. Different studies use different assumptions about how many years of income a family needs replaced, so the resulting gap estimates vary widely. Two careful analysts can look at the same household and land on different numbers. The right answer really does depend on your debts, your dependants, your existing plans, and how long you would want the money to last.

Sources

• Canadian Life and Health Insurance Association. *Canadian Life & Health Insurance Facts, 2025 Edition* (2025). PDF
• LIMRA and Life Happens. *Nearly One Third of Canadian Adults Report Living With a Life Insurance Coverage Gap* (2024). Link
• LIMRA. *2025 Canadian Life Insurance New Premium Sets New Record* (2026). Link
• Statistics Canada. *National balance sheet and financial flow accounts, first quarter 2026*, The Daily (2026). Link
• Canada Mortgage and Housing Corporation. *Residential Mortgage Industry Report, Spring 2026 Edition* (2026). Link
• Government of Canada. *Canada Pension Plan death benefit* and *CPP payment amounts* (2026). Death benefit | Payment amounts

*This article summarises published rules and research for general information, is current as of September 10, 2026, and is not personalized financial, tax or legal advice.*

If you'd like to see where your own household actually lands, that's a conversation worth having with someone who can look at your mortgage, your group coverage and your savings together. Milo Sarmiento is an independent broker based in Burnaby, works with families across Metro Vancouver in English and Tagalog, and compares options from Canada's major insurers rather than one company's shelf. Book a free, no pressure call and walk through the numbers. No obligation, and no sales pitch if the answer turns out to be that you're already in good shape.