Life Insurance Reality Check: 5 Myths That Keep Canadians Underinsured
A lot of Canadians think they understand life insurance. Then someone asks a basic question like, “If something happened to you tomorrow, what would actually get paid… and would it be enough?” and suddenly the room gets real quiet.
LIMRA’s research shows 57% of Canadian adults say they have life insurance coverage, which means 43% don’t.
And the “need gap” (people who say they need coverage or need more of it) is especially common among Gen Z and Millennials, who are also the most likely to say they don’t have enough coverage.
LIMRA keeps pointing to a major culprit: misconceptions, especially around cost. Young adults (18–30) have been shown to overestimate life insurance pricing by 10–12 times.
So, let’s clean this up.
Below are five common myths I hear all the time, plus the reality behind each one.
5 common myths about life insurance
Myth #1: “Life insurance is just for final expenses.”
Fact: Final expenses are the appetizer. The main course is income replacement.
Yes, life insurance can cover funeral costs and final bills. But for most families, the bigger problem isn’t the funeral.
It’s everything that keeps showing up after:
the mortgage payment
groceries
utilities
daycare
car payments
debt interest
education costs
Life insurance is a financial buffer that gives your family time and options, instead of forcing fast decisions when they’re already dealing with enough.
Myth #2: “It costs too much.”
Fact: People routinely guess the cost wrong. Like… very wrong.
LIMRA’s research found younger adults often overestimate the cost of term life by 10–12x.
To put a real number on it, NerdWallet reports the average cost of life insurance is about $26/month for a healthy 40-year-old buying a 20-year, $500,000 term policy (based on Policygenius data).
Important footnote: your price depends on age, health, smoking status, coverage amount, and term length. But the point stands:
Most people assume life insurance costs car-insurance money. It doesn’t.
Myth #3: “It can wait.”
Fact: Waiting is the easiest way to pay more for the exact same coverage.
Life insurance pricing is heavily tied to age and health. The longer you wait, the higher the odds that:
you’re older (automatic price increase)
something changes medically
underwriting gets tougher
your options narrow
Even if you’re single with no kids, “later” has a habit of turning into “after the mortgage,” “after the wedding,” “after the baby,” “after we pay down debt,” and then… suddenly you’re shopping at the exact point it’s more expensive.
If you’re healthy today, the best time to lock in pricing is usually before life gets complicated, not after.
Myth #4: “I don’t need it. I have coverage through work.”
Fact: Work coverage is a nice bonus. It’s rarely a full plan.
Employer life insurance is common and often cheap. Take it.
But two big issues show up fast:
1) The amount is often not enough
Many workplace plans are a multiple of salary (commonly 1–3x).
That can be helpful, but it’s not always enough to replace years of income, pay off a mortgage, and keep a household running.
A lot of guidance you’ll see suggests something in the neighborhood of 8–10x income as a starting point (then customized to your debts and goals).
2) It’s attached to your job
Change jobs, get laid off, retire, switch to contract work… and your life insurance may shrink or disappear. Some plans offer conversion, but conversion premiums can be a rude surprise.
Reality Check: if losing your job also means losing your family’s protection, that’s not a plan, that’s a dependency.
Myth #5: “Only the primary earner needs life insurance.”
Fact: If you disappeared, your household would still be buying a lot of services.
If you have a stay-at-home parent in the mix (or a parent working part-time to keep the house functioning), they’re providing real economic value.
Outsourcing childcare, cooking, cleaning, errands, and logistics adds up fast. One recent analysis put the monthly value of that unpaid work around $4,500.
Do the math over years and you’re quickly into “this is not a small number” territory.
Even if nobody earns a traditional paycheque for that work, your family would still have to pay to replace it.
Quick Reality Check: What life insurance is supposed to do
Life insurance isn’t a feel-good purchase. It’s a risk transfer.
A decent plan usually aims to cover some mix of:
Income replacement (for a set number of years)
Debt payoff (mortgage, loans, lines of credit)
Childcare / education funding
Final expenses
A cushion for inflation and the “unknown unknowns”
And then we pick the product that matches the timeline:
Term for time-bound needs (mortgage years, kids-at-home years)
Permanent for lifetime needs (estate planning, legacy, lifelong dependents)
If you’re unsure, start with one question
If you weren’t here tomorrow, what bills would still show up next week?
That answer tells us what needs funding. From there, we build a plan that fits your life and your budget.
If you want, talk to us about:
your age range
who depends on your income (partner, kids, anyone else)
mortgage/debt ballpark
what you have through work
…and we’ll turn it into a simple coverage target and a clean term vs permanent recommendation in plain English.