By Keith Martin, Executive Director, CAFII
Owning a home is one of the most significant investments you can make. But what happens when life throws unexpected challenges your way? Whether it’s a sudden illness, an unforeseen disability, an unexpected job loss or death, these events can have a profound impact on your ability to meet financial obligations, including mortgage payments. That’s where critical illness, disability, job loss and life insurance come in—they can provide essential protection that can help you and your family stay financially secure, even in the face of adversity.
Are You Protected? A Look at the Coverage Gap
Recent research from CAFII and LIMRA [LINK] highlights a troubling trend: 80% of Canadian homeowners surveyed are either uninsured or underinsured with traditional life insurance. This includes term, whole, universal, and employer-provided coverage. According to general guidance published by the Financial Consumer Agency of Canada (FCAC), homeowners may want to consider life insurance coverage that amounts to 7 to 10 years of income. However, many households appear fall short of this benchmark, increasing their financial vulnerability in the event of unexpected loss.
High-income homeowners are not immune to this troubling trend. In fact, 60% of high-income homeowners are completely uninsured, and 26% of those who are insured fall into the underinsured category [LINK]. This gap in coverage can have serious consequences, particularly if the primary income earner faces a covered health crisis, job loss or death.
The Value of Credit Protection Insurance for Mortgages and HELOCs
Credit Protection Insurance (CPI) can play a critical role in the financial stability of homeowners. Designed to help cover mortgage or home equity line of credit (HELOC) obligations in the event of a covered critical illness, disability, job loss or death, CPI offers a layer of financial protection. According to CAFII’s 2024 report, 55% of surveyed homeowners with credit have some form of CPI.
Why Homeowners Should Pay Attention
The financial impact of a death, critical illness, disability, or job loss can be devastating. Without adequate insurance, meeting monthly financial obligations (i.e., mortgage payments, HELOC or loan payments, utility bills, and everyday expenses) can become an overwhelming burden.
CAFII’s research reveals that 61% of low-income insured homeowners believe their families would struggle to cover living expenses if they experienced a sudden job loss, disability, or critical illness. This concern extends to 67% of “at-risk” homeowners—those with credit, inadequate insurance coverage, and dependents. Even high-income families are not immune; unexpected financial setbacks can quickly deplete savings and disrupt both short-term and long-term financial plans.
According to the same LIMRA research, nearly half (46%) of traditionally uninsured homeowners cite cost as the primary reason for not having life insurance. This highlights the need for accessible, affordable insurance options and greater awareness of how products like CPI can help provide critical financial protection.
Practical Steps for Canadian Homeowners
- Consult a Financial Advisor: Navigating insurance options can be overwhelming. While credit protection insurance is structured to be simple and accessible, if you are not sure how it fits into your overall financial plan, consulting a trusted financial advisor who can help you tailor a plan that meets your needs and budget.
- Evaluate Your Current Coverage: Take time to review your existing insurance policies. Does your coverage align with your current income, mortgage balance, and family needs? As a general guideline, some financial literacy resources – including those from the Financial Consumer Agency of Canada (FCAC) – suggest that households may want to consider life insurance coverage equivalent to 7-10 years of income
- Explore Credit Protection Insurance (CPI): If you have a mortgage or HELOC, CPI can offer protection by helping to cover these obligations in case of unforeseen covered events. Speak with your lender or financial advisor to understand your options.
- Stay Informed: Knowledge is power. Educate yourself about different insurance products and how they can work together to provide comprehensive protection for your home and family.
Building a Secure Future
As a homeowner, safeguarding your investment and ensuring your family’s financial stability is a key priority. Critical illness, disability, job loss, and life insurance are essential insurance coverages that can help create financial stability for your family and enable you to preserve your savings for longer-term goals.
The CAFII report makes it clear: many Canadian homeowners can find themselves at financial risk if they have gaps in their insurance coverage. By taking proactive steps to assess your needs, explore your options, and invest in the right protection, you can help build a secure financial future for yourself and your loved ones.
