Staying Healthy Can Save You Money on Your Life Insurance

So my husband and I were late to start our financial wealth building largely due to our massive student loan debt of $120,000 which we got grid of in Dec 2015. We are both 30 years old now & debt free and we are excited to plan our finances the way we should of (in my opinion) years ago.

One of the first things we did in 2016 was speak with an independent insurance broker to set up our life insurance policies. Just in time too, as I learned during my research that premiums on independent policies get more and more expensive past the age of 30.

This was also a great learning experience for me. Insurance in not an area of expertise for me at all but I did a lot of research before contacting a recommended broker because I wanted to know what I wanted and didn’t want to sign up for something I fully didn’t understand. Seeing as this was going to be a life time financial commitment (or pretty darn close to it), there was no way I was getting swindled into something I did not want or understand.

My husband and I ended going with Term to 65 life insurance policies through Manulife for $700,000 each. We had a great insurance broker that really acted like a teacher, educating us and giving us his wealth of knowledge and years of experience along the way. It also helped that we did our research and knew what we wanted, but it was nice to have a sounding board to bounce ideas and possible scenarios with. Someone with a wealth of knowledge & years of experience to back it up. I really appreciated the fact that he never tried to up sell us to whole/universal life insurance policies, which may work for some but was not something we were interested in.

Why we chose Term Life and not Whole/Universal Life Insurance:

  1. The insurance on a whole life policy is way more than we would like to pay. Before going with term life, we were quoted by another broker $10,000 per year or $833/month in premiums for both of us for a whole life policy…(yikes)
  2. I understand that whole life provides a cash value which we could later pull for whatever reason, but we feel more comfortable investing the difference we saved ourselves and going with term life instead.
  3. Term to 65 was a great option for us because it gives us more than enough time to build the wealth that we need before retirement with the peace of mind of knowing that our finances will be taken care of in the event something happens to one or both of us.
  4. In the event of a job loss, maternity leave or whatever, we are more likely to be able to keep up with the monthly premium requirements from a term life insurance policy than a whole life one without sacrificing too much of our finances along the way.

This was the experience I had during the qualification process:

  1. We contacted an independent insurance broker and told him what we wanted in terms of coverage, provided him with some personal information and he provided us with quotes right away (having an “independent” broker was really important to us because it meant that they were free to sell insurance from any company we chose and were not contractually obligated to provide insurance through one company and not another)
  2. Once we were happy with the quote, a scheduled house visit by a nurse/health provider followed shortly after. The nurse took our urine, blood samples, height and weight and asked us a few questions regarding our health, we signed some pages and he left. (It takes 30-45 minutes for each person to get through this process during the visit. A week prior to the visit, they send you a to-do list to ensure your body is well prepared to get the best possible test results. Simple things like: drinking lots of water, fasting 24 hours before visit, not drinking alcohol or doing cardio exercises prior to visit etc.) The medical results go directly to the insurance company and your broker.
  3. Then we heard nothing back for about a little over 1.5 months (our broker informed us that this was normal so we did not worry). After that time, the insurance company called and booked a phone interview for our medical questions. We scheduled a time when both me and my husband were home so we can got it over with at one time. The questionnaires are lengthy, detailed and at times seem repetitive. We provided all the information and the whole thing too about 30 minutes to complete for each person.
  4. Then we heard nothing back for another 3 weeks or so, until our insurance broker called us the other day and gave us our rates. He also mailed us the forms to sign on the dotted line and make it legal.

So how much did our term to 65 policy cost the both of us?

Well this is where I got really excited. Another thing that I learned about insurance is that most insurance brokers will quote you based on “normal” medical test results. Until they actually get the medical results back. I guess it’s a safe assumption to make and ensures that people don’t get quoted one number and then get there test results and end up having to pay more (although I would not be surprised if that happens from time to time).

However, I learned that many times insurance companies will lump people as: normal, preferred and super preferred. As the names imply, someone that is preferred would pay higher monthly premiums than someone that is super preferred.

I must point out that both my husband and I are non-smokers and are in relatively decent shape. We work out somewhat regularly (or at least try to), but nothing too crazy. We try to eat well (most of the time) and only drink occasionally.

Before reaching out to insurance brokers for life insurance, we had budgeted to spend no more than $250 a month for life and critical illness insurance (which is what ruled out whole life). We felt comfortable with this number based on our incomes and some of our future financial goals. $250 was also a number that we felt was manageable for us even on one income, which we will have to face at some point in our lives.

Here is a break-down of coverage for both of us (for term to 65 & critical illness):

Monthly budgeted amount:                      $250/month

Rated amount (after medical):                $160/month

Monthly savings                                             $90/month

A major reason for our reduced rating was that my husband and I were rated preferred and super-preferred respectively (which our insurance broker said was really rare, especially the super-preferred rating). This shaved off $90/month from what we budgeted. This also showed me that living an active lifestyle is not only good for your health, but it’s great for your pocket book as well. In a way, I have always known that in theory, but it was good to see it play out.

This $90/month savings translates to:

Yearly savings: $1,080

35 year savings: $37,800 (from age 30 to 65)

Investing these savings in a conservative portfolio returning 4% a year over 35 years translates into:

$82,235.77 (more than doubling our investment over a long period of time)

We chose a more conservative portfolio to shelter these savings because we may need to pull someone money out of these funds for: a major life event, child’s education etc. For our retirement savings accounts, we use a more aggressive approach.

Overall, these last 2 months of getting our insurance in order has been a great learning experience for me. Like I mentioned before, I am not an expert in insurance and do not claim to be, I am just sharing with you my experience and hope that you can take something useful out of it. You should speak to an insurance professional if this is something you are interested in learning more about.

Now that we have our insurance in place, we will proceed with setting our wills, funeral arrangements and life support instructions in order. That too should be a great learning experience for the both of us.

How was your experience with obtaining independent insurance? If you currently don’t have any, is this something you plan on doing in the future?



Categories: Budgeting

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2 replies

  1. Nice job shopping around. Whole life is a fantastic long-term investment vehicle. The only way for middle class folks to really make it work, is to get a policy at 18 for a large amount. This way the costs are lower because your very healthy. Otherwise, Term is fantastic. I just bought 30-year term for my wife and I and the cost was so low it would be silly for us to not buy the insurance.


    • Yah I wish I knew that when I was 18. I might of done things differently. But I couldn’t wrap my head around paying over $800 a month for 35 years just to have a cash value of $350,000 when I retire. Yah I am not sure how the middle class like myself can afford whole life in the long run unless they start super early. Congrats on the 30 year term life for you and your wife. It’s good that you guys are planning this stuff out now. Many people don’t. Thanks for leaving a comment!