Cheap Life Insurance: Which One is the Cheapest and How to Get It

Life Insurance during and after the pandemic

Life insurance has always been a part of life for many Canadians, either in the form of an individual life insurance policy, a group life insurance policy, or as mortgage life insurance. The COVID-19 pandemic brought some changes; in particular, the increased ability to get many different types of life insurance, even cheap ones without a medical exam. Nevertheless, if you are starting to look into life insurance options, it is important to understand the different life insurance types, how they compare, and which ones are cheaper than others.

 

What are the different types of insurance?

It is easy to get lost among the many different life insurance types, as they differ by the need to complete a medical exam (traditional vs no medical life insurance), size of a questionnaire (traditional life insurance vs simplified life insurance), ability to provide various pricing tiers (preferred vs standard vs rated), and even by the type of cases insurance policies cover (life insurance vs mortgage life insurance, vs accidental life insurance).

That’s why we created this detailed overview to explain each type of life insurance.

Insurance typeMedical ExamDetailed Medical QuestionnaireShort QuestionnaireCoverage limitsImportant to know
1. Traditional, Medically Underwritten Life Insurance with PREFERRED RATESYesYesNo$5,000,000+Only the lowest risk customer segments can apply (being in great shape, no health pre-conditions, no dangerous occupations).
2. Traditional, Medically Underwritten Life Insurance with STANDARD RATESYesYesNo$5,000,000+Harder to apply for during COVID-19 since it requires an in-person medical exam.
3. Traditional, Medically Underwritten Life Insurance WITHOUT A MEDICAL EXAMNoYesNo$5,000,000+Only applicable to particular customer segments with lower risks and is based on age, health pre-conditions, etc.
It is one of the preferred options during the pandemic.
4. Traditional, Medically Underwritten RATED Life InsuranceYesYesNo$5,000,000+People with certain health pre-conditions (e.g. heart disease, cancer) can apply if their health status is stable and the health issues were a long time ago.
5. Simplified Issue Life InsuranceNoNoYes$1,000,000Typically, the limits were around $200,000 -$300,000, but were increased thanks to the pandemic.
6. Guaranteed Issue Life InsuranceNoNoNo$25,000Comes with two-year waiting period clause.
7. Mortgage Life InsuranceNoYesNoMortgage LimitsSame rates for smokers and non-smokers.
8. Accidental Life InsuranceNoNoYes$500,000Only covers death due to an accident (such as a car, plane, or cruise ship accident), does not cover medical deaths like a heart attack.

How cheap are the different insurance types?

Insurance typeCostsImportant to know
Traditional, Medically Underwritten Life Insurance with Preferred RatesVery lowExtremely good rates, but many people will not be able to qualify due to health pre-conditions, obesity, older age, smoking, and drinking habits.
Traditional, Medically Underwritten Life Insurance with a Medical ExamLowStandard life insurance rates are lower, especially if you are looking into term life insurance products. It is important to note that if you are a smoker, your rates will be about double those of non-smokers.
Traditional, Medically Underwritten Life Insurance without a Medical ExamLowSame as above.
Traditional, Medically Underwritten Rated Life InsuranceMediumThe rates are typically double that of traditional underwritten life insurance with standard rates. The rates might even quadruple for smokers.
Simplified Issue Life InsuranceMedium to HighThe rates are somewhat comparable with rated life insurance, but the products have some limitations that traditional life insurance will not have, such as a limited coverage amount.
Guaranteed Issue Life InsuranceVery HighIt is important to remember that no claims are paid in the case of a medically related death in the first two years, but if such a death occurs, the premiums are returned.
Mortgage Life InsuranceLow to Medium at the very beginning and very expensive at the endThis insurance type uses a blended rate for smokers and non-smokers, meaning that if you are non-smoker, you will not benefit from better rates. Since the coverage constantly decreases (as you pay off your mortgage) but your premiums stay the same, you will pay very high premiums for a small amount of coverage.
Accidental Life InsuranceVery LowThe chances of using this insurance are very low. This type of this insurance is offered on many Canadian credit cards.

As the chart above shows, if you have options to choose from, the cheapest life insurance type will be traditional, medically underwritten life insurance with preferred rates.

Even if you are only able to qualify for standard rates of traditional, medically underwritten life insurance with or without a medical exam, you will be very well off in terms of the rates.

It is when you are looking into rated traditional life insurance or simplified issue life insurance that your rates will go up significantly for the same amount of coverage.

Guaranteed life insurance should be your last resort, as it is the most expensive insurance and it does not pay out medically related death claims during the first two years. There are, however, particular situations, such as covering final expenses, where guaranteed issue might be the only option.

We do not recommend looking into mortgage insurance and accidental life insurance because of the following reasons:

  • Mortgage insurance: It only covers the outstanding amount of your mortgage balance and as you pay it off, the coverage becomes lower, although you will continue paying the same amount. If you are a non-smoker, you will pay a blended rate that is similar to what a smoker would pay.
  • Accidental life insurance: This covers only a vary small set of potential death scenarios and, if purchased alone, does not provide adequate protection. In many cases, you might even have some type of it on your credit card. You can check here using this convenient credit card travel insurance coverage tool.

Cheap life insurance for smokers: what you should know

If you are a smoker, most life insurance types will be more expensive for you (approximately double the rates of non-smokers) with the exception of mortgage insurance (uses blended rates) and guaranteed life insurance (does not have a medical questionnaire).

There are some simplified life insurance providers that might not ask about your smoking but, in general, these insurance rates will not be cheap.

The good news is, if you stop smoking and remain a non-smoker for a certain period of time (typically one or two years), many providers will allow you to reapply for cheaper life insurance rates.

Cheap life insurance without a medical exam: what you should know

There are three types of life insurance that come without a medical exam; see an overview below. Traditional, medically underwritten life insurance without a medical exam is the cheapest option.

Insurance TypePremiumsComments
Traditional, Medically Underwritten Life Insurance Without a Medical ExamThe cheapest optionExtremely good rates, but many people will not be able to qualify due to health pre-conditions, obesity, older age, smoking, and drinking habits.
Simplified Issue Life InsuranceMore expensive option than traditional life insuranceApplicants must consider exactly what coverage is needed, as simplified issue is not cheap. It also helps to compare multiple providers when seeking this type of insurance.
Guaranteed Issue Life InsuranceMost expensive optionUse only if there are no other alternatives as this coverage is very limited and expensive.

Particularly during the pandemic, traditional, medically underwritten life insurance without a medical exam is becoming more popular since it offers a cheap alternative to a life insurance application where you must see a nurse and provide fluids.

Where to get cheap life insurance?

We recommend using an insurance broker when looking for cheap life insurance, as the best way to get cheap life insurance is to compare as many providers as possible. Brokers have access to multiple insurance products, whereas agents can only sell the products of one company.

As an example, our insurance specialists work with more Canadian life insurance providers than most insurance brokerages. In fact, we work with approximately 30 Canadian life insurers. Let our team help you find the best and cheapest life insurance solutions. Contact us today. We look forward to hearing from you.

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