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Costco Life Insurance – Is It a GREAT Deal or Over-Hyped?

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Costco Life Insurance

Costco Life Insurance Canada: Is It Any Good?

A client recently asked me if buying life insurance through Costco is a good idea.

In a word, I said no.

The thing is they DO offer life insurance from Manulife, one of Canada’s best life insurance companies…..and I truly love Costco…but that’s not enough. 

There are limits to the coverage Costco offers that its members should be aware of before they pull the trigger. 

Let’s take a closer look! 

A Brief History of Costco

Costco Wholesale corp has been operating in Canada for roughly 35 years and fills a unique niche.

Their story began with the founding of the Price Club in the mid-70’s in the US. They pioneered a brand new strategy of offering unmatched discounts on high-quality goods to small businesses.

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 does 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 are able to do so because they have a high level of customer confidence and loyalty.

Members may purchase a vast array of services through Costco including phone & internet plans, vacation packages, rental cars, heating & cooling installations and more.

They also offer a plethora of insurance including auto, home, health, dental, travel and of course Costco life insurance.

So again, we all know Costco is a great place to buy a variety of 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 doesn’t it? 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 that you’re eligible to purchase 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 through an advisor channel and one is available through various associations including Canadian universities/ Colleges, professional associations and places like Costco.

This product is known as Manulife Alumni Term Insurance.

I love Manulife but personally I wouldn’t recommend a client purchase Manulife association coverage.

Especially 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.

See cost comparison below.

Costco Manulife Term Insurance

Term life insurance is the most affordable and best option for anyone purchasing insurance to protect their family, mortgage or replace income. I’d say 90% of consumers purchase term insurance for this purpose.

It’s designed to fill a temporary need such as protecting your family when they’re most vulnerable.

Real Life Example: 

Remember when you die, your paycheque dies with you.

Think about it. You’re 38 years old, with young children, earning $80,000 annually and God forbid, you die unexpectedly.

Your net income is approximately $60,000. If your spouse and dependents are relying on that income to keep coming in for the next 15 to 20 years and suddenly it stops…..that’s $900,000 – $1.2 million of cash they’re never going to see.

That’s where term life insurance comes in. It’s flexible and affordable. In the event you die unexpectedly, the insurance company pays out a lump sum tax-free to your family or beneficiaries.

This money helps them continue to pay all the bills and stay in the same home during the most difficult time of their life.

Costco Term Life Insurance

Costco Manulife term insurance is available to all Costco members and Costco Executive members receive an additional 5% discount! Costco 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
  • Premiums are NOT guaranteed
  • Coverage stops at age 65 or age 80
  • No conversion option
  • Medical exam is not usually required if you’re age 50 or under
  • No medical exam required if you’re age 55 or under for face amounts of $250,000 or less

Costco Term Life Insurance

Costco Life Insurance Canada  - Term Life insurance Conversion

Costco doesn’t offer a conversion option and this is reason enough to avoid their life insurance coverage altogether. So what is a term life insurance conversion option anyway?

A conversion option on a term life insurance policy is like a “get out of jail free” card. You’re likely to never need it but when you do, it’s vital.

Essentially it provides you with the option of exchanging 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 cancelled due to any change in your age or health. Also, you can lock in rates that never increase over the life of the policy.

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

I am going to share some up to date rates for you right now. This will give 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. 

Age

Male

Female

30

$49.40

$39.80

35

$52.8

$43.40

40

$61.40

$50.80

45

$80.00 

$63.20

50

$107.80

$89.80

55

$170.20

$147.20

60

$306.00

$210.20

Rate Comparison

Now that you have an idea of what we’re looking at for Costco 10 year term, let’s compare another Manulife product and Empire Life rates.  

For the purposes of this article I am using a 38 Year old Male, Healthy, non-smoker with standard rates. 


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Costco 10 Year Term Life Insurance: $56.00 Per Month 
Current Progress
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Manulife 10 Year Term Life Insurance: $29.77 Per Month 
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Current Progress
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Empire Life Solution 10 (10 Year Term): $26.55 Per Month 

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 10 years! A little research saves 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

Empire Life, Solution 25, 25-year term, $59.85 per month, standard non-smoker rate

Wow! 

Costco Life Insurance Canada Pros 

Every life insurance company or option has pros and cons. It’s very important to weigh these when you’re in the market for a policy. 

Here’s what I like about Costco life insurance : 

Costco life insurance is quick and easy to apply for - plus who doesn't love Costco

Underwritten by Manulife which is a terrific company

Costco Life Insurance Cons 

Unfortunately Costco life insurance cons far outweigh the pros. Yet another reason to call Policy Architects today: 

Costco term life insurance is very expensive compared to other traditional carriers including Manulife. 

No conversion Option with costco manulife term insurance

Term lengths are limited. You can only purchase 5 or 10 year terms. There’ 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 in nature. 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. 

Application does NOT have to be completed with a licenced life insurance agent.  

Limited riders and options. For example, Costco 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 my advice is to contact an independent life insurance agent to see if we can do better. 

Manulife is honestly one of my favourite insurers – but you won’t get their whole range of products if you buy your policy from Costco. 

Give us a ring today and we can find the best coverage for you for the best possible price! 

Costco Life insurance canada

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