Oct 3, 2026
Canada’s Life Insurance Market Is Growing — But the Coverage Gap Remains
Canada’s life insurance industry is entering a period of steady growth, with new sales reaching record levels in 2025. But while more Canadians are purchasing coverage, a significant gap remains between the protection many households have and the amount they may actually need. According to a recent report from AM Best, Canadian life insurance and annuity insurers are expected to maintain stable growth, supported by strong capital positions, improving earnings and continued demand for life insurance. At the same time, changing household finances, higher mortgage balances, inflation and rising incomes are creating new questions about whether existing life insurance policies still provide enough protection.
Life Insurance Sales Reached a Record in 2025
Canadian life insurance new annualized premiums reached approximately $2.3 billion in 2025, representing a 4% increase from the previous year. Whole life insurance was a major contributor to this growth. Premiums for whole life policies increased by 10% and accounted for roughly 70% of the life insurance premium market. Participating whole life policies represented 87% of newly sold whole life premiums. The increase in sales reflects continued demand for long-term financial protection, but it also shows how the Canadian life insurance market is evolving. Technology is playing an increasingly important role in that evolution. Digital applications have made it easier for consumers to research and purchase coverage, while insurers are increasingly using artificial intelligence and other technologies to streamline underwriting and accelerate decisions. For consumers, that can mean a faster and more convenient experience when applying for life insurance.
More Canadians Have Coverage, But the Gap Is Still Significant
Record sales do not necessarily mean Canadian households have enough life insurance. AM Best noted that a coverage gap continues to exist because existing policies may not have kept pace with changes in household finances. For example, a life insurance policy purchased several years ago may have been appropriate when a household had a smaller mortgage, lower income and fewer financial obligations. Over time, however, those circumstances can change. Mortgage balances may increase, salaries may rise and the cost of replacing a household’s income may become substantially higher. Inflation can also reduce the purchasing power of a death benefit over time. This means having life insurance is only part of the equation. The more important question is whether the amount of coverage still reflects the financial responsibilities that would remain if the insured person were no longer there.
Why Reviewing Your Coverage Matters
Life insurance is often purchased during major life events, such as getting married, buying a home or having children. But those same milestones can also change how much coverage a household needs. A policy review may be worthwhile after significant financial or family changes, including:
- Buying a home or taking on a larger mortgage
- Getting married or divorced
- Having children
- Starting a business
- Increasing household income
- Taking on new debts
- Changing employment or benefits
- Approaching retirement
- Experiencing significant changes in savings or investments
For example, someone who purchased a $500,000 life insurance policy when they had a small mortgage and no children may have very different financial obligations a decade later. That does not automatically mean they need more insurance. It means their coverage should be compared with their current obligations, income and financial goals.
Technology Is Changing How Canadians Buy Life Insurance
One of the major developments in the Canadian insurance industry is the growing use of digital tools. Traditionally, purchasing life insurance could involve extensive paperwork, medical information and a lengthy underwriting process. Digital applications and automated underwriting are helping insurers simplify parts of that process. Artificial intelligence is also becoming increasingly important in underwriting. Insurers can use technology to analyze information more efficiently and, in some cases, provide faster decisions for applicants. For consumers, these developments may make life insurance easier to access and less time-consuming to purchase. However, technology does not eliminate the need to choose an appropriate amount and type of coverage. A faster application process cannot replace a careful assessment of how much financial protection a household actually needs.
Canadian Insurers Remain Financially Strong
AM Best maintained a stable outlook for Canada’s life and annuity insurance industry. The rating agency pointed to several factors supporting the industry’s financial position, including strong regulatory capital, financial flexibility, favourable earnings and diversified business operations. The industry’s operating results also improved in 2025. Pre-tax operating gains increased by 4% to approximately $19.7 billion, while post-tax gains rose 7% to $15.1 billion. Insurance revenue increased by slightly more than 2%, reaching approximately $102.8 billion. The insurance service result also improved, rising 12% to about $14.5 billion. These figures provide an indication of the overall financial strength of the Canadian life insurance sector, although the financial performance of the industry does not determine whether a particular policy is suitable for an individual household.
Individual and Group Life Insurance Continue to Play Different Roles
Individual life insurance revenue increased 7% in 2025 to approximately $31 billion. Group life insurance remained the industry’s largest business line, generating more than $33 billion in revenue. For many Canadians, employer-provided group life insurance is an important source of financial protection. However, relying entirely on workplace coverage can create limitations. Coverage through an employer may change when someone changes jobs, retires or leaves the workforce. The amount may also be insufficient for a household’s long-term financial obligations. An individually owned life insurance policy can provide another layer of protection that is not tied directly to employment. For this reason, Canadians may benefit from looking at their workplace benefits alongside any individual policies they already own.
Inflation and Mortgages Are Changing the Insurance Equation
The financial pressures facing Canadian households are also creating challenges for the life insurance industry. Inflation can affect household budgets, while higher mortgage costs can increase the amount of money a family would need to maintain its financial stability after the loss of an income earner. At the same time, economic uncertainty and growing digital operations are creating additional challenges for insurers, including cybersecurity risks. For consumers, these developments reinforce the importance of periodically reviewing financial protection rather than assuming that an older policy will remain appropriate indefinitely.
What This Means for Canadians
The Canadian life insurance market appears financially stable, and new sales reached a record in 2025. But the continued existence of a coverage gap highlights an important distinction: more Canadians buying life insurance does not necessarily mean every household has enough coverage. Your insurance needs are connected to your financial situation. A growing mortgage, a higher income, additional children or new financial responsibilities can change the amount of protection your family may need. On the other hand, paying off debt, building substantial savings or approaching retirement may change the calculation in the opposite direction. That is why a life insurance review can be useful after major financial changes and as part of broader financial planning.
Get a Quote
Whether you’re purchasing life insurance for the first time or reviewing an existing policy, understanding your current coverage needs is an important step in protecting the people who depend on you. A personalized review can help you understand the types of coverage available and determine how your existing protection compares with your current financial responsibilities.
Get a quote and explore your life insurance options with Bonjour Assurance.
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