Purchasing life insurance is one of Canadians’ most critical financial decisions to protect their families. However, with premiums ranging from a few hundred to a few thousand dollars per year, it can also be a significant expense.
The good news is you can leverage several proven strategies to reduce your life insurance costs without compromising coverage. This comprehensive guide will walk you through the top ways to save money when buying life insurance in Canada.
Shop Around and Compare Quotes
The first critical step to getting the lowest life insurance rate is comparing quotes from multiple providers.
It’s important to note that insurance premiums can vary significantly between different companies, even when offering identical coverage.
For example, a 2023 survey fromConsumer Reportsfound that a healthy 30-year old non-smoker would pay anywhere from $160 to $300 annually for a $250,000 20-year term life insurance policy, depending on the insurer. ( Source : How to save money on life insurance in Canada – ratehub Canada )
On average, buyers who take the time to compare quotes from 5 or more insurers can save 10% to 40% on their policy premiums compared to just buying from one company.
When getting quotes to compare, provide the same information to each insurer to analyze rates accurately on an apples-to-apples basis. Details to have on hand include:
- Age ( example : Life insurance for kids, life insurance for parents )
- Gender
- Health history
- Smoker status – Read more at : Life Insurance For Smoker
- Coverage amount
- Type of policy
In addition to comparing rates, you’ll also want to evaluate each insurer on financial strength, customer service, and claims-paying reputation. Independent rating agencies likeA.M. Bestrate life insurers on their financial stability to assist you in choosing a reliable provider.
Key Takeaway:Shop around and compare quotes from several insurers to potentially save 10-40% on premiums.
Lock In Rates Early in Adulthood
When you first purchase life insurance coverage, your age significantly impacts premium costs. Generally, the younger you are when you initially buy a policy, the lower your rates will be over your lifetime.
Life insurance rates are calculated based on your life expectancy. Insurance companies use actuarial tables to determine the statistical probability of death at any given age.
These mortality tables demonstrate that younger adults in their 20s and 30s are much less likely to pass away than older individuals in their 50s and 60s.
As a result, insurers can offer lower premiums to younger buyers, confident they’ll pay for many years before a death benefit is due.
For example, a healthy 30-year old may only pay $30 per month for a $500,000 term life policy. If they waited until age 50 to buy the same coverage, they would pay more than triple at over $100 monthly.
Both term and permanent life insurance policies offer guaranteed level premiums that remain constant throughout the contract. However, with term life insurance, you’ll have to renew the policy periodically to maintain coverage. You’ll see a rate hike at each renewal based on your age.
Locking in coverage early in adulthood can mean paying half or even a quarter of the premiums you would pay if you delayed getting insured until middle age. The savings are magnified when you consider paying lower premiums for decades.
Key Takeaway:Buying life insurance before age 50s nets the lowest rates over your lifetime. Delaying coverage until later means significantly higher costs.
Maintain a Healthy Lifestyle
Your overall health and lifestyle have a direct correlation to life insurance rates. When determining premiums, insurers carefully assess your medical history, height/weight, family health background, smoking habits, alcohol use, driving record, and participation in risky hobbies.
Individuals with active, low-risk lifestyles typically qualify for the cheapest life insurance rates. Here are some tips for keeping insurance costs down through healthy living:
- Exercise regularly:Get at least 150 minutes of moderate activity like brisk walking per week. Regular exercise reduces the risk of chronic diseases.
- Maintain a healthy BMI:Being overweight or obese raises mortality risk and life insurance premiums. Keep your BMI between 18.5 and 24.9. ( Source : Impact of Height and Weight on Life Insurance – protectyourwealth )
- Eat a nutritious diet:Follow Canada’s Food Guide recommendations for vegetables, fruits, whole grains, lean protein, and healthy fats. A proper diet reduces disease risk.
- Don’t smoke:Smokers pay 1.5 to 4 times more for life insurance than non-smokers. Quitting can lower your rates over time.
- Drink alcohol moderately:Heavy drinking negatively impacts health and life expectancy. Stick to moderate intake per Canada’s Low-Risk Alcohol Drinking Guidelines.
- Get regular check-ups:Stay on top of screenings and manage conditions through medication and lifestyle changes. Well-controlled conditions mean lower premiums.
Making sensible lifestyle choices throughout adulthood keeps insurance costs low by reducing the insurer’s risk of paying out an early death benefit.
Key Takeaway:Maintaining an active, low-risk lifestyle leads to the cheapest life insurance rates. Poor health habits mean paying higher premiums.
Select Term Life Insurance
When looking to maximize savings, term life insurance policies offer the most affordable premiums for pure death benefit protection.
With term life insurance, you pay lower premiums in exchange for coverage for a predetermined period, typically 10 to 30 years.
Here are some of the critical advantages of term life insurance for cost savings:
- Lower premiums:Term life premiums are significantly cheaper than permanent life insurance for the same death benefit. Premiums are 5 to 15 times lower.
- Level rates:Most term life policies guarantee your rates will remain level for the entire term, so your premiums don’t increase as you age.
- Customizable terms:You can match the term length to your needs, like covering until kids are grown or a mortgage is paid off. This avoids overpaying for unnecessary coverage.
- Decreasing needs:As your insurance needs decrease as you age, you can drop coverage or re-enroll for a lower benefit amount to align with your evolving needs.
For most Canadians needing essential death benefit protection, term life insurance offers an affordable and adaptable solution. The premium savings can be invested to supplement retirement income.
Key Takeaway:Term life insurance costs significantly less than permanent insurance. It provides temporary coverage at the lowest rates.
Take Advantage of Available Discounts
Some insurance companies offer unique discounts and incentives that allow certain applicants to qualify for reduced rates on life insurance in Canada:
- Group or work insurance:Many employers provide group life insurance plans with guaranteed issue underwriting at a 5% to 15% discount off regular rates.
- Couples discount:Buying life insurance for you and your spouse from the same insurer may qualify you for a discount of 5% to 15%. Some insurers also offer family discounts.
- Non-smoker discount:Kicking the habit for at least 12 months can reduce premiums by 40% to 60% thanks to qualifying for non-smoker rates.
- Auto-pay discount:Opting for monthly auto-deductions from your bank account saves the insurer administrative costs. Many reward this convenience with a 5% to 10% discount.
- Professional association plans:Becoming a member of certain professional bodies gives access to discounted group life insurance rates.
- More significant coverage discounts:Insurers may provide discounts on more extensive policies with death benefits above $1 million as they generate substantial revenue.
- Affinity discounts:Large affinity groups like alum associations, unions, and cooperatives often life insurance broker special life insurance offers for members.
Ask your insurance advisor about potential discounts to maximize savings. Even a 5% price break can equate to hundreds of dollars in annual savings.
Key Takeaway:Take advantage of discounts like non-smoker rates, auto-pay, group plans, and couples discounts to reduce premiums.
Compare Prices Annually at Renewal
If you initially purchased term life insurance, you must renew your policy once the existing term expires to maintain coverage. Many insurers impose significant rate hikes at renewal since you’re now older.
Rather than automatically renewing with your existing provider, use the renewal date as an opportunity to get quotes and secure savings:
- Shop for quotes:Get proposals from several insurers to see if you can find a lower rate than your renewal offer. As health changes over time, new insurers may provide better pricing.
- Consider shorter terms:Opting for a 20 rather than 30-year term may provide savings at renewal due to the shorter coverage period.
- Reduce your coverage:If your needs have decreased, lower your death benefit to align with new obligations. This lowers premiums.
- Switch to permanent life insurance:For some, switching to a permanent life policy that accrues cash value may make sense later in life, depending on costs.
- Drop coverage:If you no longer need life insurance due to reduced financial obligations, letting coverage lapse instead of renewing can save you premium costs.
Maintain Your Health Over Time
While getting life insurance at a younger age nets you a lower starting premium, it’s still crucial to maintain your health over time.
Developing new medical conditions as you age or letting your health deteriorate can cause your premiums to skyrocket at renewal.
Staying healthy not only means a longer life but also helps control life insurance costs in your later years:
- Keep up with recommended health screenings to catch any problems early when they are most treatable. This includes mammograms, colonoscopies, skin exams, prostate exams, bloodwork, eye exams, and dental cleanings.
- If you develop a medical condition, be vigilant about taking any prescribed medications and follow your doctor’s guidance to keep the condition well-controlled.
- Don’t let minor health complaints slide. Address symptoms early by seeing your doctor to prevent them from worsening into more severe issues.
- Stick with healthy lifestyle habits like regular exercise, a nutritious diet, stress management, and moderation of vices like alcohol.
- Lose weight if you’ve put on excessive pounds over the years. Obesity complicates many diseases and directly lowers life expectancy.
Keeping your health on track over the decades you own life insurance ensures you pay the lowest premiums based on your risk profile. Letting health slip can cost you.
Review In Force Policies for Savings Opportunities
If you’ve already purchased a life insurance policy in the past, don’t assume your existing coverage and rates are set in stone. You may be able to realize savings on in-force policies:
Policy Replacement
If you initially purchased coverage when you were young or had suboptimal health, you may pay higher premiums than if you replaced your policy today in improved health. Have an independent broker rerun your details with various insurers to see if there are savings from replacing your policy with a new one. Just beware of back-end fees if cancelling specific permanent policies early.
Term Conversion
Permanent life insurance policies often can convert from term life over to permanent coverage with little to no medical underwriting. Locking in when you’re young and healthy could mean paying lower premiums over the long run.
Premium Deposit Account
Some permanent policies allow you to prepay future premiums at today’s rates to sidestep rising costs as you age. This lets you lock in lower rates now.
Policy Loans
If you have a permanent policy with cash value accumulation, you can borrow against your policy value at favourable rates to pay premiums instead of out-of-pocket. This keeps policies active while minimizing your expenses.
Dividend Options
Participating in whole-life policies pays dividends from insurer profits. You can choose to apply dividends to pay down premium costs.
Accelerated Benefits
If you develop a terminal illness, you may be able to access a portion of your death benefit early to pay for medical care instead of higher premiums later.
Review in-force policies annually to identify savings opportunities and ensure you’re optimizing value.
Conclusion
The bottom line is comparing insurers, buying early, optimizing health, selecting term life insurance, and proactively reviewing policies can substantially reduce life insurance costs for Canadians. With intelligent planning, you can secure the coverage you need to protect your family without overpaying. Contact an independent life insurance advisor for personalized guidance on reducing your costs.
FAQs
How can I save money on life insurance in Canada?
You can save money on life insurance in Canada by comparing quotes from multiple providers, purchasing coverage early in life, maintaining good health, choosing term life insurance, taking advantage of discounts, reviewing policies at renewal, and keeping premium payments current.
What is the cheapest life insurance in Canada?
Term life insurance offers the most affordable pure death benefit protection in Canada. Term life premiums are significantly lower than permanent life insurance policies. A healthy 30-year-old may pay under $30 monthly for $500,000 of term life coverage.
How much does life insurance cost in Canada?
Life insurance costs in Canada vary greatly depending on your age, health, lifestyle, policy type, and coverage amount. Budget between $30 to $300 monthly for a $500,000 term life policy. Permanent insurance with living benefits costs more. Get quotes to find your specific rate.
Should I buy life insurance at age 50?
Buying life insurance at age 50 can still provide affordable protection, with term life policies running $75 to $150 monthly depending on health. While rates are higher than purchasing earlier in life, coverage remains within reach for most 50-year-olds. Waiting longer becomes more expensive.
How much life insurance do I need in Canada?
As a general guideline, you need a life insurance death benefit equal to 5 to 10 times your annual income. Other factors like debts, dependents, and final expenses should also be considered when determining your ideal coverage amount.
Who has the cheapest life insurance in Canada?
Canada’s cheapest life insurance providers include PolicyMe, Dialogue, Foresters Financial, Industrial Alliance, and Sun Life. Premiums can vary significantly between insurers based on your demographics, so always compare quotes.
How can I lower my life insurance premium?
You can lower your life insurance premium by maintaining a healthy lifestyle, comparing rates annually, raising your deductible, paying premiums annually rather than monthly, and requesting your policy re-rated if your health has improved.
When should I buy life insurance in Canada?
The ideal time to buy life insurance is early in adulthood, in your 20s or 30s, when rates are lowest. However, reasonably priced coverage is still available into your 40s and 50s. Beyond 60, costs rise more rapidly, or coverage may be denied.
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