Bought a Home? Should You Get Life Insurance Now?

Buying a home is one of the biggest financial milestones for young Canadians—and one of the riskiest. For many households, a mortgage becomes the single largest ongoing expense, often requiring two incomes to remain affordable.

Because of that risk, many new homeowners purchase life insurance soon after closing. Increasingly, the coverage people choose goes well beyond the remaining mortgage balance. At first glance that extra protection can look excessive, but a closer look shows a change in approach: younger buyers may not be over-insuring so much as finally insuring appropriately.

Not every homeowner needs life insurance—single buyers without dependents may be fine without it—but for households dependent on two incomes, the financial consequences of losing an earner can be severe.

Why buying a home changes your insurance needs

A mortgage does more than add a large monthly bill; it increases the financial vulnerability of everyone in the household. If one partner dies, could the surviving partner afford the mortgage and maintain their standard of living? Would they be forced to sell the home? Could they cover everyday expenses and future goals?

Those are the questions homeownership exposes. As Andrew Ostro, CEO and co-founder of PolicyMe, puts it: “The real question is: Would someone experience serious financial hardship if my income disappeared tomorrow?”

That increased exposure is why many people buy life insurance when they get a mortgage. But Ostro cautions that a mortgage alone shouldn’t be the only factor in deciding coverage.

“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

PolicyMe data shows homeowners are buying substantially more life insurance than non-homeowners—often hundreds of thousands of dollars more. Policies of $1 million are becoming more common among those with mortgages, while non-homeowners more often carry around $500,000 of coverage.

Young buyers are increasingly choosing larger policies earlier in life. That can look like over-insuring if you assume life insurance only exists to wipe out the mortgage. But that view misses other financial needs a family may face.

“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.”

So what appears to be excessive coverage is often a realistic assessment of the household’s full financial exposure.

What life insurance should actually cover

Thinking of life insurance only as a mortgage payoff is limiting. A fuller approach considers multiple needs, such as:

• Income replacement: How many years would your family need an income substitute to stay financially stable?
• Child-related expenses: Ongoing costs for childcare, food, housing and education can last many years.
• Partner support: Could your partner maintain the household’s standard of living without your earnings?
• Other debts: Outstanding balances on lines of credit, car loans or personal debts that would burden survivors.
• Future costs: Big expenses like tuition, savings goals, or a buffer period 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 notes.

Many advisors suggest a practical rule of thumb: the remaining mortgage balance plus 10 to 20 times your annual income. It’s not perfect, but it provides a useful starting point for estimating how much coverage you may need.

Ostro adds that your insurance term doesn’t necessarily need to match your mortgage amortization exactly. A more important question is how long someone would rely on your income.

Mortgage insurance vs. term life insurance

One common mistake is assuming lender-provided mortgage insurance is sufficient. While convenient, it has important limitations.

First, the payout goes directly to the lender—not your family. That means the home could be paid off, but survivors lose flexibility in how to use the funds. They might prefer to invest money for future needs rather than applying it immediately to the mortgage balance.

Second, lender-provided coverage typically decreases as the mortgage balance falls, while premiums often stay the same. Third, this type of insurance can be 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 can also create problems when you change lenders or renew your mortgage, because you may have to requalify medically. If your health has changed, replacement coverage could be more expensive or harder to obtain. By contrast, a standard term life insurance policy usually provides:

• A fixed death benefit
• Level premiums that do not rise during the term
• Flexibility for beneficiaries to use the payout as they see fit
• Locked-in pricing and coverage for the policy term, provided premiums are paid

Another frequent misconception is relying solely on workplace coverage. Employer plans often provide a modest benefit—commonly around $100,000—which is typically far less than what homeowners need to replace lost income and cover long-term costs.

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

Cost is a common reason people delay buying life insurance, but for many younger Canadians it’s more affordable than expected. For example, someone in their 30s might pay roughly $25 to $40 per month for a $500,000–$700,000 term policy, depending on health and term length. Those premiums are usually fixed for the duration of the policy.

To assess whether your coverage is adequate, ask yourself a few practical questions:

• Would your household struggle financially without your income?
• Does your mortgage rely on two paycheques?
• Do you have—or plan to have—children?
• Could your partner afford to stay in the home on their own?
• Are you relying primarily on workplace-provided insurance?

If you answered yes to any of these, it’s worth reviewing your coverage to ensure it reflects your household’s real needs.

The bottom line

Buying a home doesn’t automatically mean you need life insurance, but homeownership often highlights the true financial risks a family faces. The purpose of life insurance isn’t only to clear a mortgage; it’s to protect the lives and plans built around that home.

For a generation dealing with higher housing costs and tighter budgets, what appears to be “over-insuring” may simply be a honest calculation of what their families would need if the unexpected occurs.

Read more about life insurance:

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