Life insurance provides crucial financial protection for Canadian families. However, premiums can be expensive and put pressure on monthly budgets.
This comprehensive guide provides money saving tips on life insurance in Canada without sacrificing needed coverage. Follow these tips and gain confidence you’re getting the lowest rates from reputable providers in Canada.
Introduction
Life insurance is essential to protect your family’s financial future in case of unexpected loss or disability. However, premium costs can deter Canadians from purchasing adequate coverage.
The good news is there are numerous ways to reduce the costs of life insurance through proper planning and strategy. This allows families to gain needed protection while minimizing expenses.
This guide will explore both little-known and conventional tips to save money on various types of life insurance. Canadians can benefit from:
- Ways to save before buying coverage
- Strategies during the application process
- Methods to reduce costs after purchase
- Mistakes and overspending to avoid
Armed with insider knowledge, Canadians can secure the most savings on their policies without compromising protections for loved ones.
Why Life Insurance is Essential for Canadians
Before diving into money saving tips, it’s important to understand why life insurance is a fundamental component of any financial plan.
The key reasons life insurance is essential include:
- Income replacement – Life insurance provides tax-free funds to replace income lost if the breadwinner dies unexpectedly. This ensures loved ones maintain their standard of living.
- Debt coverage – The payout from life insurance can pay off debts like mortgages, loans, and credit cards that survivors would otherwise need to cover.
- Final expenses – At a minimum, life insurance proceeds should cover funeral costs so surviving family members don’t take on this financial burden.
- Estate taxes – Life insurance can provide liquidity to pay estate taxes so beneficiaries receive their full inheritance.
- Peace of mind – The security of life insurance allows family members to focus on recovery rather than finances during difficult times.
While premiums add expense, life insurance remains fundamental to protect Canadians’ families and assets. The goal is to secure adequate coverage at the lowest possible costs.
Health and Lifestyle Factors That Influence Life Insurance Rates
The primary factors that affect the costs of life insurance include:
- Age – Rates increase as you get older. Buying earlier locks in lower rates.
- Smoking – Smokers pay 2-3x higher premiums than non-smokers. Quitting saves the most.
- Weight – Overweight applicants pay more than healthy weight. Losing weight can lower rates.
- Medical history – Conditions like diabetes and heart disease increase costs. Improving health saves money.
- Family history – Increased risk due to family illnesses can increase premiums.
- Hazardous hobbies – Activities like car racing and rock climbing boost rates. Reducing high-risk hobbies can reduce costs.
- Alcohol consumption – Heavy drinking increases premiums. Reducing alcohol intake lowers rates.
- Drug use – Most insurers decline applicants who use illicit substances and some prescription medications.
- Driving record – Multiple tickets, accidents, and DUIs lead to increased rates. Safe driving saves money.
The following table summarizes how improving lifestyle factors can reduce life insurance rates:
| Health and Lifestyle Factor | How It Impacts Rates | Money Saving Tips |
|---|---|---|
| Smoking | Smokers pay 2-3x higher premiums | Quit smoking for 12+ months |
| Overweight | Overweight applicants pay more | Lose weight to get in shape |
| Hazardous hobbies | High-risk hobbies boost rates | Reduce or eliminate dangerous activities |
| Alcohol intake | Heavy drinking increases costs | Lower alcohol consumption |
| Driving record | Violations lead to higher premiums | Maintain a clean driving record |
The key takeaway is improving health and reducing risks are two of the most effective ways to get lower rates on life insurance.
Money Saving Tips On Life Insurance BEFORE You Buy
The best opportunity to maximize savings is before you purchase a policy. Here are tips to save on various types of life insurance.
Buy the Right Type of Coverage
Choosing the wrong insurance type leads to wasteful spending and inadequate protection.
Guidelines for choosing the right life insurance include:
- Term life insurance – Provides affordable pure protection during your prime earning years when loved ones depend on your income. Ideal when needs are temporary.
- Permanent life insurance – Offers lifelong coverage and builds cash value over time. Best if you need life insurance your entire life.
- Mortgage life insurance – Quickly covers the balance of your mortgage if you pass away before it’s paid off.
- Living benefits – Provide funds if diagnosed with critical illness or become disabled and unable to work.
Consult an experienced life insurance advisor to ensure you choose the right products for your unique situation.
Shop Around to Compare Quotes
Rates for similar coverage can vary greatly between providers. The cost difference between the highest and lowest quote can exceed 30%.
Working with an independent broker gives you access to quotes from over 30 top Canadian life insurance companies. This allows you to secure the most competitive rate for your particular situation.
The table below shows sample $500,000 term life policy rates for a 40-year old healthy non-smoker male :
| Insurance Company | Term 10 Quote | Term 20 Quote |
|---|---|---|
| Canada Life | $29.11 | $48.10 |
| BMO Insurance | $29.70 | $45.00 |
| Empire Life | $34.65 | $56.70 |
| Canada Proction Plan | $39.15 | $54.90 |
https://www.canadalife.com/insurance/life-insurance/term-life-insurance/term-life-quote.html#/
https://www.bmo.com/insurance/life-insurance/easyterm
https://www.empire.ca/insurance/buy-life-insurance/quote-buy
https://www.cpp.ca/life-insurance-quick-quote/
Taking the time to shop around and compare quotes from multiple insurers is absolutely essential to maximizing savings on your life insurance purchase. An experienced broker can do the legwork of gathering multiple quotes and identifying the provider offering the best value.
Work With a Broker vs Captive Agent
Independent brokers have contracts with multiple insurers and can provide unbiased quotes across the industry. Captive agents sell products from just one company.
Brokers save consumers money by accessing the most competitively priced policies for each unique situation. Captive agents are limited to their company’s rates.
Avoid Direct Purchase Online
Buying directly from an insurance company’s website or app skips the full underwriting process. You don’t undergo medical exams and may provide a limited health history.
To offset the risk of missing information, insurers charge higher premiums for direct purchase options. Policies bought via brokers often cost significantly less.
Buy Only the Coverage Amount You Need
Overinsuring wastes money on excess premiums. Underinsuring leaves your family vulnerable. Accurately calculating needs using a life insurance calculator optimizes this balance.
Consider factors like income replacement, debts, funeral costs, children’s expenses, and more when determining adequate coverage.
Take Advantage of Discounts and Promotions
In addition to shopping around, look for ways to stack savings:
- New customer discounts – Some insurers offer 10% off your first year of coverage or limited free insurance promotions.
- Multi-policy discounts – You can save ~10% by bundling your life insurance with auto, home, and other policies from the same provider.
- Group association discounts – Being part of an alumni group, union, or association may provide discount codes on life insurance.
- Loyalty discounts – After staying with an insurer for 3-5 years, loyalty discounts may become available to reduce your costs.
Buy When You’re Young and Healthy
Life insurance rates are heavily influenced by age and health. Waiting to get coverage means accepting higher premiums.
The chart below shows how monthly premiums for a 20-year $100,000 term life policy increase dramatically as you get older:
| Age | Sample Monthly Premiums |
|---|---|
| 30 years old | $13.12 |
| 40 years old | $18.85 |
| 50 years old | $44.67 |
| 60 years old | $139.59 |
As this data shows, delaying a purchase until your 50s or 60s increases costs 2-10x. Lock in rates early when premiums are lowest.
Strategies to Save During the Life Insurance Application Process
The application process presents additional opportunities to reduce rates.
Disclose Medical History Accurately
Life insurance applications ask detailed questions about your health, lifestyle, driving record, family history, and more. Failing to fully disclose medical conditions or lifestyle risks is considered misrepresentation and can allow the insurer to deny a claim later on.
Although disclosing health issues won’t improve your rates, full transparency protects your family from denial of benefits down the road. Answer all questions completely and honestly.
Take the Free Medical Exam
Insurers provide their best rates to healthy applicants who complete the medical exam, even if no exam options exist. The exam allows you to qualify for “preferred” discounted premiums.
Optimize the Medical Exam
Since your medical exam directly impacts rates, make sure you’re at your healthiest:
- Fast for 12 hours prior and avoid caffeine before the exam for optimal glucose and blood pressure readings.
- Hydrate by drinking extra fluids the day before to avoid high protein readings.
- Rest up the night before and avoid strenuous exercise to reduce outliers in vitals.
- Dress comfortably in short sleeves to enable easier blood draws and exam access.
Following these tips helps you ace the medical exam and gain access to the lowest rates.
Complete Electronic Applications
Insurers incentivize online and electronic applications through discounted rates compared to traditional paper applications. Completing applications electronically saves the insurer administrative costs. Take advantage of e-policy delivery and e-signature options when available.
Pay Annually Rather Than Monthly
Annual premium payments save approximately 8-10% in total costs compared to paying monthly. Paying yearly avoids installment fees and other administrative costs insurers otherwise spread across 12 payments.
How To Save Money On Life Insurance AFTER You Buy
The ways to save aren’t limited to just the shopping experience. Here are tips to reduce costs after purchase.
Cancel Unnecessary Riders
Eliminate optional riders that no longer provide value. For example, if your kids have grown up and moved out, cancel the children’s term rider. Avoid paying for extra benefits that no longer apply to your situation.
Improve Health and Lifestyle
Insurers incentivize healthy living by offering discounted premiums. Actions like quitting smoking, losing excess weight, and increasing physical activity could lower your rates after buying coverage.
For example, kicking the habit for 12+ months allows smokers to qualify for non-smoker discounts, reducing premiums by up to 40%.
Reduce Coverage as Obligations Decrease
Carefully re-evaluate your life insurance needs whenever life circumstances change. Common reasons to reduce coverage include:
- Paying off your mortgage
- Getting out of debt
- Children becoming financially independent
- Downsizing assets in retirement
Consult with your broker before making changes to ensure you modify coverage appropriately while saving premium costs. Never cancel a policy until a new one is in force.
Switch to Non-Smoker Rates
After going 12 consecutive months without smoking or other nicotine use, take a new cotinine test to qualify for non-smoker discounts. This can save 40% off your existing premiums.
Apply for Preferred Rates
Missed the chance for discounted preferred rates when you first applied? After improving health and lifestyle, insurers may allow you to re-apply to reduce your cost.
Convert Term Policies to Permanent Coverage
Already own term life insurance but now want lifelong coverage? Rather than purchasing a new permanent policy, many insurers allow you to convert term coverage to a permanent policy type later on.
The key benefit is bypassing medical underwriting to qualify for the new policy. Converting term to permanent is significantly cheaper than buying a brand new permanent policy after health changes.
Replace an Existing Policy
Do you have an older policy with high premiums? Newer policies often provide better value for Canadians. Work with your broker to run an in-force illustration and replacement analysis to identify potential cost savings from switching companies.
Common Life Insurance Buying Mistakes That Lead to Overspending
Avoid these key mistakes to maximize savings on life insurance:
Paying More for Permanent Insurance Too Early
Permanent life insurance costs significantly more than term insurance. Purchasing permanent insurance too early in life can lead to overpayment of premiums.
Delay permanent purchase until later in life when needs are lifelong. Rely on term insurance for temporary coverage needs in earlier years.
Accepting the First Quote You Receive
Failing to compare quotes leads to overspending. Rates for similar policies can vary by over 30% between top insurers.
Work with a broker and shop around for the most competitive pricing. Never accept the first quote.
Hiding Relevant Health Issues
Failing to disclose health conditions you’re asked about is considered misrepresentation and can allow claims denial later on.
Although transparency won’t improve rates, it provides peace of mind knowing claims won’t be denied over undisclosed issues that arise.
Overinsuring Your Needs
Determine exactly how much life insurance you need using an accurate calculator. Going over this amount leads to wasting money on excess premiums.
Being Loyal to the Wrong Insurer
Sticking with an existing insurer out of loyalty can be costly if they no longer offer competitive pricing. Don’t hesitate to shop around periodically and switch to maintain optimal rates.
Affordable Life Insurance Options for Canadians
Below is a comparison of affordable life insurance product types available to fit different needs and budgets:
| Type | Description | Benefits | Considerations |
|---|---|---|---|
| Term life insurance | Provides protection for 10-30 years. Cheapest way to obtain ample coverage when needs are temporary. | – Lowest premium costs – Can buy large amounts of coverage | – No cash value accumulation – Higher cost to renew later in life |
| Simplified issue life insurance | No medical exam required. Offers smaller coverage amounts compared to fully underwritten policies. | – No health exams – Quick approval process | – Costs more than fully underwritten options – Maximum limits on coverage amount |
| Permanent life insurance | Offers lifelong protection. Allows you to build cash value that grows tax-deferred. | – Lifelong coverage – Cash value accumulation | – Higher premium costs – Requires lifelong premium payments |
| Group life insurance | Get coverage through employer or association. Often provides ability to obtain higher coverage amounts without medical underwriting. | – Potentially discounted rates – Easy enrollment | – Rates increase every 5 years – Changing jobs loses coverage |
Which option fits your budget? Be sure to discuss your needs with an advisor and compare quotes across your affordable choices.
Conclusion
Canadians can secure ample life insurance protection for less by implementing the cost saving tips provided throughout this guide. Significant savings come from:
- Comparing quotes and working with a broker
- Choosing the right policy type for your needs
- Buying the right amount of coverage
- Maintaining your health
- Taking advantage of discounts
- Renegotiating your policy after purchase
While life insurance is fundamental, take the time to shop around and negotiate the best value. Undergoing a regular review with your independent broker ensures your policy adapts appropriately as your needs change.
Discuss your unique situation with an advisor to determine how to maximize savings on the right life insurance for you. For specialized guidance, contact Insurance Direct Canada. IDC provides Canadians with expert advice as the nation’s premier online insurance agency.
FAQs on Money Saving Tips for Life Insurance in Canada
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