You bought a home—should life insurance be next?

That reality is driving more homeowners to buy life insurance soon after getting the keys. And increasingly, they’re choosing coverage that extends far beyond the remaining mortgage balance. At first glance, that might seem excessive. But a closer look suggests a shift: young Canadians may not be over-insuring, but rather finally insuring properly.

Of course, not every homeowner necessarily needs life insurance—particularly single buyers with no dependents—but for households that rely on multiple incomes, the financial stakes can be much higher.

Why buying a home changes your insurance needs

A mortgage doesn’t just add a hefty monthly payment; it introduces a new level of financial risk. If something were to happen to one partner, could the other carry the mortgage alone? Would they be forced to sell? Could they maintain the same standard of living?

These are the kinds of questions homeownership tends to surface. As Andrew Ostro, CEO and co-founder of PolicyMe says, “The real question is: Would someone experience serious financial hardship if my income disappeared tomorrow?”

That’s why mortgages often act as a trigger for buying life insurance. But according to Ostro, that shouldn’t be the only starting point.

“The question everyone should be asking themselves is ‘If I were to pass away and my income were to disappear, would there be someone who can’t really afford their life or their expenses?’” he says. “If the answer is yes, then you certainly need life insurance.”

Are young Canadians “over-insuring”? Not exactly

Data from PolicyMe shows that Canadians with mortgages are buying significantly more life insurance than those without mortgages, often hundreds of thousands more. Coverage amounts of $1 million are increasingly common among homeowners, compared to $500,000 for non-homeowners.

Younger buyers, in particular, are opting for higher coverage earlier in life.

Article Continues Below Advertisement

Skip Ad

X

That might seem excessive—especially if your mortgage is smaller than your policy. But that gap isn’t necessarily a mistake.

“There’s a lot more to someone’s life insurance needs than just the mortgage,” Ostro says. “Paying off the mortgage and leaving the family debt-free is important, but beyond that, there are future expenses to consider.”

What looks like “over-insuring” is often just a more realistic reflection of what’s actually at stake.

What life insurance should actually cover

It’s easy to think of life insurance as a way to pay off your mortgage, but in practice, that’s just one piece of the puzzle. A more complete approach looks at the bigger picture:

• Income replacement: How many years would your household need to replace your income?
• Child-related expenses: From child care to education, kids add long-term financial needs
• Partner support: Could your partner maintain your shared lifestyle on their own?
• Other debts: Lines of credit, car loans, or other obligations
• Future costs: Tuition, savings goals, or simply time to adjust financially

“The biggest factor is usually children and their future expenses: housing, food, clothing, education, and general living costs until they become financially independent,” Ostro says.

That’s why many advisors suggest a simple rule of thumb: your mortgage balance plus 10 to 20 times your annual income. It’s not exact, but it’s a useful starting point.

Ostro also says homeowners shouldn’t assume their insurance term needs to perfectly match their mortgage amortization. The better question, he says, is how long someone will depend on your income financially.

Mortgage insurance vs. term life insurance

If there’s one common misstep, it’s assuming that mortgage insurance offered by your lender does the job.

It might seem like the easiest option, just check a box when you apply for your mortgage, but it often comes with some pretty significant drawbacks.

For one, the payout goes directly to the lender, not your family. That means your mortgage may be paid off, but your partner or dependants don’t have flexibility in how that money is used (they may prefer to invest it rather than applying it towards the mortgage balance, as one example).

Second, coverage decreases over time as your mortgage balance shrinks—even though your premiums stay the same.

And perhaps most importantly, it can be significantly more expensive. “For relatively healthy people, mortgage insurance can easily cost two to three times more than comparable term life insurance,” Ostro says.

Mortgage insurance may also require borrowers to requalify if they switch lenders or renew later, something that could become more difficult if their health changes. By contrast, a standard term life insurance policy typically offers:

• A fixed payout amount
• Level premiums that don’t increase over time
• Flexibility for beneficiaries to use the money as needed
• Locked-in pricing and coverage for the duration of the term, so long as premiums continue to be paid

Another common misconception? Assuming workplace coverage is enough. Many employer plans offer around $100,000 in life insurance, which is far below what most homeowners actually need.

What it costs—and how to know if you have enough

One reason people hesitate to buy life insurance is cost. But for many young Canadians, it’s more affordable than expected.

For someone in their 30s, a policy in the $500,000 to $700,000 range might cost roughly $25 to $40 per month, depending on factors like health and term length. “It’s generally much more affordable than people expect,” Ostro says.

And with most term policies, that price is locked in for the duration of the coverage period.

If you’re not sure whether you have enough, start with a few simple questions:

• Would your household struggle financially without your income?
• Does your mortgage depend on two incomes?
• Do you have (or plan to have) children?
• Would your partner be able to stay in the home?
• Are you relying solely on workplace insurance?

If you answered yes to any of these, it may be worth taking a closer look at your coverage.

The bottom line

Buying a home doesn’t automatically mean you need life insurance, but it often reveals just how much is at risk. 

The real goal isn’t just to protect the mortgage; it’s to protect the lives built around it.

And for a generation navigating higher housing costs and tighter margins, what looks like “over-insuring” may simply be a more honest calculation of what their families would need if the unexpected happens.

Read more about life insurance:

• Do I really need life insurance?
• Term vs. permanent life insurance
• How much life insurance do I need?

About Alicia Tyler

The Toronto-based journalist has 20 years of experience as an editorial leader in digital and print media, specializing in consumer and service journalism. Her work has appeared in Money.ca, MindBodyGreen and Hone Health.

Linkedin Twitter Website