New research by LIMRA, commissioned by the Canadian Association of Financial Institutions in Insurance (CAFII), found that 80 per cent of Canadian homeowners lack sufficient insurance coverage, being either uninsured or underinsured with creditor protection insurance (CPI) or traditional life insurance.
The research also found that and 38 per cent of homeowners with credit are “at risk.” These are homeowners with credit who have dependents but are not sufficiently insured.
Furthermore, the study showed that 55 per cent of Canadian homeowners use CPI.
CAFII says the primary objective of the research was to show the prevalence of insurance products, with a particular focus on CPI. “The results have raised significant concerns about the financial security of numerous Canadian families,” they write in a statement about the survey’s release. “The report set out to address pivotal questions regarding the insurance environment among Canadian homeowners. It sought to ascertain whether individuals with lower incomes prioritize CPI over others and whether CPI plays a significant role in the market for homeowners.
Most low-income homeowners were underinsured
What the survey of 1,175 homeowners did reveal was a significant gap: 75 per cent of low-income homeowners were underinsured while 24 per cent had no insurance. Even among all income brackets, the 38 per cent at risk – those with credit who are underinsured or uninsured (underinsured is defined as those with traditional life insurance that won’t cover at least seven years of income) and who have partners and dependents – are particularly vulnerable to financial hardship in the event of unexpected life events.
For three income types – high income, low income and those at risk, the survey looks at financial attitudes and concerns, traditional life insurance ownership and coverage.
Notably, CPI product ownership shows the same pattern across all income brackets. Fewer low-income homeowners own employer benefits life and term life insurance than those in other income brackets.
Close to half said they can’t afford life insurance
Among the traditionally uninsured, 46 per cent said they can’t afford life insurance while 50 per cent also said they don’t have emergency funds to access in place of life insurance. Those who do have CPI in place said it was good value for the money and that it was convenient to purchase.
LIMRA recommends the industry collaborate with regulators, the government and community groups to raise awareness about insurance and CPI, as 45 per cent of those in the sample said they felt financially uninformed.
