10 Ways to Save Money on Life Insurance In Canada

| August 17, 2019
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We all want to minimize our insurance premiums – car, house, life insurance, all of them. Even those of us that are life insurance brokers aren’t adverse to making sure our premiums are as low as they can be.

With other types of insurance such as car and home, there’s a variety of ways we can save money. Things like deductibles and options can let us modify our payments. With life insurance it’s a bit more nebulous.

Nevertheless, let’s go through some specific action items you can take to lower your insurance premiums. Bear in mind that most of these tactics are available only when you purchase your insurance policy.

  1. Shop around. This almost goes without saying – almost. There’s still a lot of Canadian consumers who accept the first insurance premium that their local agent or bank rep offers them. The more companies you shop, the better the chance is you’ll find lower premiums. And you may also consider shopping brokers. Some brokers will shop only a few companies. Other brokers will offer their clients rates from a broad spectrum of available companies, ensuring that if a company with low premiums exists for you, that they have it available.
  2. Take your medical exam first thing in the morning and answer all medical questions thoroughly and exhaustively. You’ll typically have better ‘numbers’ for your medical exam in the morning with nothing in your stomach yet. And counter-intuitively, the more you tell the insurance company the higher you raise the chances of you getting better rates. Tell the company about your entire medical history, don’t make them assume worst case scenario.
  3. Buy a shorter term. This doesn’t necessarily save you money in the long term, but it can save you money in the short term. That’s because policies with shorter terms (i.e 10 year term instead of 20 year term) have lower premiums initially. Just make sure that your policy has a ‘conversion’ clause.
  4. If you buy term, watch your renewal date. Term insurance policies that renew do so at extremely high premiums so initiate your application for a new policy at least three months prior to the renewal. If you wait, you’ll end up paying the much higher renewal premiums as you wait for your new policy to be issued. An old timer insurance agent taught me this trick – staple an 8.5X11 sheet of paper to the front of your policy and write on it in black marker ‘REVIEW PRIOR TO {date of your renewal including the year”}. Every once in a while as you browse past it, the note will help trigger your memory as the date gets closer.
  5. Review your policy occasionally. Actually this is frequently done to ensure you have enough life insurance. Occasionally however you may find that you need less life insurance and can reduce your amount and thus your premiums.
  6. Consider blending policy types. If you expect that you need less life insurance over the years, you can combine different policy types into one policy. You could for example have a policy that’s partly 10 year term and partly 20 year term. After 10 years you would drop the 10 year term and just carry on with the 20 year term in years 11-20. If you assume that you need less life insurance over time, then this route will be less expensive than purchasing a full 20 year term and lowering the amount in the future.
  7. Quit smoking – anything. If you smoke (anything!) even occasionally, consider quitting for a year. A full year without any tobacco or related activities and you’ll qualify for nonsmoker rates. Doing so can cut your premiums almost in half.
  8. If you receive a rated policy, take two actions. First, your broker should consider shopping other companies to see if you can get a lower rating. Secondly, ask to have the rating reconsidered after a period of time has passed. If the condition that caused the rating has passed the insurance companies will frequently remove the rating. In fact, even having the condition stable for a long period of time can sometimes lower or remove the rating.
  9. Don’t buy mortgage life insurance. Instead, buy term life insurance from a broker. The same goes with association type life insurance – this is the stuff you may get through organizations you belong to. Term life insurance is frequently cheaper than either of those two types of life insurance.
  10. Don’t be reluctant to buy long term life insurance when you’re younger (if in fact you do want long term life insurance). Long term life insurance premiums are on the rise across the industry and of course these premiums also rise as you get older. So the sooner you lock in your long term rates, the more money you’ll save over the rest of your life.

In the end, remember that the face amount or death benefit is what matters most – so what we want to do is make sure we’re paying the least amount of money to receive that death benefit.