Cost is a big reason why some people avoid looking into life insurance. But it shouldn’t be, there are many ways to get cheap life insurance in Canada.
Life insurance, especially term life insurance, is a lot less expensive than most people think. A 20-year, $500,000 term life insurance policy costs around $35/month for someone in their 30s. And for most people, that’s enough coverage to keep their families protected.
Here are some tips to save money on life insurance. Further down, we break down how to save money on life insurance premiums.
How to get cheap life insurance in Canada: before buying
1. Buy term, not permanent life insurance
Term life insurance is the simplest and most affordable form of life insurance. It pays out a benefit to your beneficiaries if you pass away within a specified timeframe, usually 10, 20, or 30 years. This is the best option to get protection during the years that matter most (when you still have a mortgage & children in the house, for example). For most families, term is the way to go.
The alternative (permanent life insurance policies) are much more expensive – we are talking hundreds of dollars more each month. Why? Because a permanent policy guarantees a payout, whether you die young or old (so long as you keep paying your premiums).
Most people don’t need life insurance coverage past retirement. As you get older, your family’s future expenses typically decrease. For example, your mortgage gets paid off and your kids move out of the house. As these expenses drop, your life insurance needs begin to decrease too. So, if your insurance needs are only temporary, why would you pay for permanent coverage? Learn more about the different types of life insurance here.
If an insurance broker pushes you to consider a permanent policy, get a second opinion to make sure it is the right choice for you.
2. Only buy the amount of insurance you actually need
You can save money by getting precise and honest advice on both the amount of protection you need and the length of time for which you need it. The difference in cost between $500,000 and $800,000 of coverage might only be about $20 a month (depending on your age and gender), but after 20 years of monthly payments, it definitely adds up!
Get the right advice to make sure you aren’t overprotecting yourself and your family. Before buying life insurance, consider how your family depends on you financially and how they would adjust if you passed away. The easiest method of calculation is to use the DIME method that adds up your Debts, Income, Mortgage, and Education for your kids.
3. Take the life insurance medical exam
Many companies offer “guaranteed issue” and “simplified issue” life insurance policies, which promise to get you “an instant approval” without a medical exam. Unlike standard term life insurance products, these types of policies don’t require you to get poked for a blood test, take a medical exam, or provide every detail about your family history. Instead, you’re approved on the spot.
That may sound convenient, but these policies cost far more than their “medically underwritten” counterparts. Just how much might you overpay? For $500,000 of coverage, a healthy person would pay about $85/month (or $1,020/year) for a “guaranteed issue” life policy. In comparison, this same person would pay $30/month (or $360/year) for the exact same coverage with a standard term life policy.
Sacrificing a little bit of convenience upfront will pay off greatly in the long run.
4. Buy young
The cost of life insurance increases the older you get. Health issues tend to arise later in life. If you’re thinking about life insurance, the sooner you buy, the more you’ll save.
5. Shop around
One of the easiest ways to save money is to shop around for life insurance quotes. Get quotes from a few different life insurance companies and you’ll be surprised how much they can differ. Different insurance companies will price certain demographics more aggressively – and this is in your favour!
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6. Don’t waste time (and increase costs) shopping across brokers
Life insurance is regulated, so they can’t discount rates be it online on in person. The rate you’ll get at BMO, will be the same rate any broker will offer.
It can also show up as a red flag if you’re suddenly requesting multiple quotes from different brokers. Desperation to get life insurance can impact your rates.
7. Full disclosure up front
To get the most accurate quotes, it’s best to be transparent about your health history. If you opt to leave out information, like higher-than-normal blood pressure, or a history of high cholesterol, your insurer will likely find out and it could change your rates, or worse, they could walk away from insuring you all together. Also, some insurers are more willing to work with medical issues (e.g. diabetes, family history of cancer) than others, so disclosure can increase competition and result in cheaper life insurance than had you not disclosed.
One important note: If you didn’t disclose information, and die as a result of a medical complication, they can deny your claim.
8. Quit smoking
Smoking is no way to get cheap life insurance. It’s far more expensive to be a smoker. However, after one year of not smoking those rates can come back down. In fact, if you’ve already bought life insurance, ask for a re-qualification after one year going tobacco-free to see if you can get cheaper life insurance. Also, according to Health Canada’s calculator, smoking costs $2,500 per year, man, think of what compound interest could do if you invest $2,500 per year instead.
How to get cheap life insurance premiums after you buy
9. Lose weight
Sure, it’s more of a lifestyle factor but losing weight can dramatically help you get cheaper premiums. Lower cholesterol levels, healthier blood pressure readings, and a lower risk of developing a chronic illness make you look better; in the the mirror and the eyes of the insurer.
10. Reduce (or eliminate) alcohol intake
Drinking less alcohol reduces health risks, especially over the long run. A life insurance company will check your application, bloodwork, and potentially your driving record to get an idea of how much you’re drinking and weigh the risk accordingly.
11. Improve your driving
If you have multiple moving violations on your car insurance driving history, insurance companies may increase your premiums.
12. Eliminate the unnecessary riders
Riders are options you can add to your policy, but if you’re looking to get cheaper life insurance, removing them can be a quick win. For example, if you’re a parent you might have a children’s life insurance rider, essentially life insurance for your kids nestled under your own policy. It’s a smaller payout to help cover the costs of funeral expenses and some therapy. Kids don’t really need life insurance because you don’t rely on them for income, that’s the harsh reality. Another rider is the living benefits rider which pays a portion of your death benefit in advance if you’re diagnosed with a terminal illness.
13. Pay annually
Typically, we pay life insurance premiums monthly, but one lump sum annual payment can save you up to 18% on your premium.
14. Improve your credit score
Insurance companies are able to do a soft check on your credit score. A better credit score means you’re paying your bills on time and assures the company you’re with you’ll pay them on time, too.
The bottom line
One important caveat, don’t get “cheap life insurance.” By that I mean, buy life insurance from quality providers with the right coverage. If the worst should happen, you don’t want your family dealing with a denied claim for strange exclusions in your policy.
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