Fact CheckedA client recently asked me if buying life insurance through Costco is a good idea.
In a word, I said no.
They offer life insurance through Manulife, one of Canada’s best companies. I genuinely love Costco AND Manulife, but that’s not enough.
Costco’s coverage has limitations its members should be aware of before purchasing it.
Let’s take a closer look!
A Brief History of Costco
Costco Wholesale Corp has operated in Canada for roughly 35 years, filling a unique niche.
Their story began with the founding of Price Club in the mid-70s in the US. They pioneered a new strategy of offering small businesses unmatched discounts on high-quality goods.
Costco opened its first warehouse in Canada in 1986, and in 1993, the two mega-stores merged.
Today, Costco is one of Canada’s largest retailers, with 10 million members. Each member pays an annual fee of approximately $60 – $120, and Costco Canada makes about $25 billion in sales annually.
“Just like in a lavish nightclub, you can’t actually get in without a cover. Costco Canada holds a cover policy too, only it’s in the form of a membership fee and lets you shop all year long as you please.”
All About The Amazing Costco Canada Membership, IcyCanada.com
So, How Does Costco Work?
Costco offers members lower prices on goods & services by purchasing in bulk and passing the savings on to its members. They operate on very thin margins but can do so because they have high customer confidence and loyalty. Members may purchase various services through Costco, including phone & internet plans, vacation packages, rental cars, heating & cooling installations, and more.
They also offer many insurance products, including auto, home, health, dental, travel, and Costco life insurance. Again, we all know Costco is a great place to buy various products, including groceries. But is it the best place to shop for term life insurance?
Costco Manulife Term Insurance
Costco offers term life insurance to its members through Manulife Canada. Sounds good. Who wouldn’t like the opportunity to save money on insurance from one of Canada’s top life insurance companies?
Well, there’s a catch.
The Manulife term life insurance you purchase through Costco is NOT the same product you can buy through an independent broker.
What Do You Mean?
Many large life insurance companies in Canada, including Manulife, offer two different term insurance products.
One is sold individually through a network of insurance brokers, and the other through an affiliate channel. This second product is available through various associations, including Canadian universities and colleges, professional associations, and places like Costco.
It is known as Manulife Alumni Term Insurance.
I love Manulife, but I wouldn’t recommend a client purchase Manulife association coverage.
This is especially true when they could buy a Manulife Family term life insurance policy with better options and guarantees through an independent broker at a much better price.
Costco Term Life Insurance – What Do They Offer?
Costco Manulife term insurance is available to all members. Executive members receive an additional 5% discount! These life insurance policies have the following features:
- Coverage amounts $50,000 – $1 million
- 5-year terms renewable to age 65
- 10-year terms renewable to age 80
- Premiums increase every 5 or 10 years
- Coverage stops at age 65 or age 80
- No conversion option – one of the main reasons not to purchase
- A medical exam is not usually required if you’re age 50 or under
- No medical exam is necessary if you’re age 55 or under for face amounts of $250,000 or less
- 30-day money back guarantee
Costco Life Insurance Canada – No Term Life Insurance Conversion
Costco Term Insurance doesn’t offer a conversion option, which is reason enough to avoid their life insurance coverage altogether. So, what is a term life insurance conversion option anyway?
A policy conversion option is like a “get out of jail free” card. You’re likely never to need it, but when you do, it’s vital.
Essentially, it allows you to exchange all or a portion of your term coverage for permanent protection, which lasts the rest of your life. You can execute this option without providing one iota of medical evidence or underwriting.
Why is this important? If you ever become uninsurable due to an injury or change in your health, this option guarantees your insurability moving forward.
Converting to a permanent plan means your coverage can never be canceled due to any change in your age or health. Also, you can lock in rates that never increase over the policy’s life.
“There are no fees to convert a term policy to a permanent policy, Spealman says. However, the rate you pay for coverage—your premium—will increase. How much it increases depends on several factors.”
How and Why to Convert Term Life to Permanent Life Insurance, Forbes
Costco Life Insurance Canada Rates $500,000
Term 10, Non-Smoker
Here are some up-to-date rates for you right now. This gives you some idea of what you are looking at for premiums throughout the decades.
Always remember these quotes are just estimates. They are meant to serve as a guide. These premiums also include the 5% discount mentioned above:
| Age | Male | Female |
|---|---|---|
|
30 |
$47.00 | $37.80 |
| 35 | $50.20 |
$41.20 |
|
40 |
$58.40 |
$48.20 |
|
45 |
$76.00 | $60.00 |
| 50 | $102.40 |
$85.2I 0 |
|
55 |
$161.60 | $139.80 |
| 60 | $290.60 |
$199.80 |
Rate Comparison
Now that you know what we’re looking at for the Costco 10-year term, let’s compare another Manulife product with Empire Life rates.
For this article, I am using a 38-year-old Male who is healthy and a non-smoker with standard rates.
I’m starting with Manulife and an apples-to-apples comparison. If he buys Manulife coverage through Policy Architects, this client pays $3147 LESS over ten years! A little research can save you thousands.
If our client opts for Empire Life, he saves even more: $3534!
Even better – for the same money or less, he could get $500,000 of coverage with rates locked in for 20 years, NOT 10 years: Empire Life, Solution 20, 20-year term, $41.40 per month Life, Solution 25, 25-year term, $59.85 per month, standard non-smoker rate.
Wow!
FollowMe™ Life – CostCo Guaranteed Issue Coverage
If you lose group coverage, Costco FollowMe Life offers a safety net. Apply 60 days before your plan expires, and you won’t have to complete a medical questionnaire at the time of your application.
Coverage amounts:
– $25,000 – $200,000
– Guaranteed renewable up to age 80
– You can get a cash advance of 50% of the face amount to a maximum of $50,000 for no extra cost
– 30-day money-back guarantee
However, there are some caveats: you must be aged between 18 and 69, a Canadian resident, and not ill or injured when your group life coverage ends.
Costco Life Insurance – PROS
Every life insurance company or option has pros and cons. It’s imperative to weigh these when you’re in the market for a policy:
- Costco life insurance is quick and easy to apply for – plus, who doesn’t love Costco
- Underwritten by Manulife, which is an excellent and financially stable company.
Costco Life Insurance – CONS
Unfortunately, Costco’s life insurance cons far outweigh the pros. Yet another reason to call Policy Architects today:
- Costco term life insurance is costly compared to other traditional carriers, including Manulife.
- There is no conversion option or guaranteed insurability for life with Costco Manulife term insurance.
- Term lengths are limited. You can only purchase 5- or 10-year terms, and there’s no 20- or 30-year option.
- Limited and post-claim underwriting: If you want to apply for term life insurance through Costco, you have to answer questions, but they are limited in number and general. This leads me to think that full underwriting is done only when a claim is made, which may create more opportunities for claims to be denied.
- The application is NOT completed with an independent licensed life insurance agent.
- There are limited riders and options. For example, Costco’s term life insurance does not offer a child rider option.
My Final Word About Costco Life Insurance Canada
If you are considering purchasing Costco life insurance, I advise contacting an independent life insurance agent to see if we can do better.
Manulife is one of my favorite insurers, but you won’t get their full range of products if you buy your policy through Costco.
Give us a ring today, and we can find the best coverage for you at the best possible price!
