Most Canadians Lack a Financial Safety Net in 2025: What It Means for Insurance and Wealth Planning

A new 2025 report by RBC Insurance has revealed that the majority of Canadians would struggle financially if they faced a sudden illness or disability. Despite rising living costs and medical expenses, fewer than half of Canadians have adequate coverage or emergency savings to withstand a health crisis.

This growing gap in protection highlights an urgent need for better insurance planning, particularly among middle- and high-income families. Below, we’ll explore what the data shows, why it matters, and what steps Canadians can take to strengthen their financial safety net 👇

The 2025 RBC Survey: A wake-up call for financial preparedness

Survey results reveal declining confidence in financial security

According to RBC Insurance’s 2025 Canadian Wellbeing Survey, nearly 60% of Canadians say they would be unable to cover more than three months of expenses if illness struck. This figure marks a 7% decline compared to 2023, showing a worrying trend as inflation and medical costs rise.

Among respondents earning over $100,000 annually, 38% admitted they had no dedicated health or income protection plan. This challenges the assumption that higher income automatically means greater financial resilience.

Here’s the key takeaway 👇

• 📉 Financial confidence has dropped across income brackets.
• 💊 Health-related costs remain one of the top financial stressors in Canada.
• 🏥 Even affluent families face gaps in coverage for long-term disability and critical illness.

Insight: The findings suggest that even financially stable Canadians underestimate the impact of prolonged illness on their wealth accumulation goals.

Why Canada’s health safety net isn’t enough

While Canada’s public healthcare system covers most hospital and physician services, it does not provide income replacement or extended coverage for long-term recovery. Many Canadians incorrectly assume their employer benefits will fill that gap — but coverage is often partial or temporary.

Private disability and critical illness insurance are designed to address this issue, yet uptake remains low. Experts warn that a lack of awareness, combined with the perception that “it won’t happen to me,” contributes to underinsurance.

Here’s the key takeaway 👇

• 🧾 Public health care ≠ total financial protection
• ⏳ Short-term benefits often end after 17 weeks
• 💬 Critical illness policies can replace income during recovery

Experience: Financial advisors in Ontario and Alberta report that many clients only realize these gaps after facing sudden medical emergencies, forcing them to deplete savings or sell assets.

High-net-worth Canadians: Reassessing risk and protection

Even high-net-worth individuals (HNWIs) are not immune. Many rely on diversified investments but overlook liquidity during unexpected crises. Insurance plays a crucial role in preserving both capital and lifestyle when income stops temporarily.

Wealth management firms such as National Bank Financial and Manulife Private Wealth have recently emphasized the integration of insurance into overall estate and tax planning strategies.

Here’s the key takeaway 👇

• 💼 Insurance is essential for maintaining wealth continuity
• 🧮 Integrate coverage with long-term tax planning
• 🏦 Leverage insurance products with cash value for flexibility

Expert insight: “It’s not about replacing lost income — it’s about protecting lifestyle sustainability,” says Jennifer Li, senior advisor at RBC Insurance.

Practical steps to strengthen your financial safety net

For Canadians looking to safeguard their finances, three immediate steps are recommended: reassess coverage limits, review employer benefits, and establish an emergency fund equal to 6–12 months of expenses.

Here’s the key takeaway 👇

• 📋 Review life, health, and disability coverage annually
• 💰 Automate contributions to emergency savings accounts
• 🏥 Compare premium vs. benefit ratios before renewal

Insight: Many insurers offer “living benefit” options, which allow partial withdrawals during illness without canceling policies.

Tax and regulatory context: CRA-approved insurance deductions

While personal insurance premiums are typically not tax-deductible in Canada, certain business owners can claim deductions if policies are tied to key-person coverage or shareholder agreements. It’s important to consult a certified tax professional before filing.

See Verified source: Read more in the Yahoo Finance Canada report and the Canada Revenue Agency (CRA) guidance on insurance-related deductions.

Summary

• Most Canadians lack financial protection in case of serious illness or disability.
• High-income earners are not exempt from underinsurance risks.
• Reassessing coverage and building emergency funds are critical in 2025.

See Verified source: For the full RBC Insurance survey, refer to Yahoo Finance Canada.

FAQ

What percentage of Canadians feel financially unprepared for illness?

About 60% of Canadians report they could not manage expenses beyond three months without income, according to the 2025 RBC survey.

Does public healthcare cover income loss in Canada?

No. Canada’s universal healthcare covers medical services but not lost wages or long-term recovery costs.

What insurance policies can fill the gap?

Critical illness, disability, and life insurance provide income protection and lump-sum benefits during recovery.

Are premiums for private insurance tax-deductible?

Generally no, unless tied to business or key-person coverage under CRA rules.

What should high-income Canadians do to prepare?

Review your insurance portfolio, increase liquidity, and integrate insurance into estate and tax planning strategies.