When I became a father, one of the first things I did was call up my life insurance provider to review how much life insurance I have and go through the various term life insurance options.
My carrier reminded me that my existing $1,000,000 term life policy is set to expire in 2022. I'd purchased the policy over 10 years ago when I was thinking of getting married. I figured, given I had about $1,200,000 in mortgage debt from buying a single family house, it was best to cover that liability so my future wife wouldn't be financially burdened if I passed.
As soon as I became a dad, I suddenly had 22 years to consider before my son graduates from college. Therefore, I decided to get a quote for a $2,000,000, 25-year term life insurance policy.
It came out to $181/month with my existing provider. I thought it would be best to lock down a quote before anything unhealthy happens. Premiums skyrocket once you have any type of significant medical condition.
Unfortunately, because of the size of the quoted policy, I was required to get my blood drawn, piss in a cup, and do an EKG. I hate getting blood drawn. It's frankly one of the main reasons why I didn't want to get a $1,000,000+ policy in the first place. But life insurance isn't for me, it's for my family, so I proceeded.
Life Insurance Test Results
The lab technician came to my house and did her thing within 40 minutes. I filled out some forms and checked a box to know whether my blood comes back as HIV positive. What fun it is to wait for potentially life-changing results.
Then I totally forgot about the life insurance application process for a couple weeks until I got a call from my insurance provider to give me the results. Here's what he said in a nutshell:
We got your test results back and I wanted to say congratulations for doing so great! You were top-rated for 19 out of 20 categories we assess for. For one category you were slightly below top-rated. Your cholesterol came in at 4.6 versus <4.0. You were so close, but due to the results, we cannot give you the Preferred ULTRA rate that we initially quoted. Instead, we can offer you the Preferred PLUS rate instead. The cost of the Preferred PLUS rate for a 25Y/$2M policy is $226/month.
Bait And Switched
Damn Gina! Because of not being top rated on 1 out of 20 categories (5%), I have to pay a 25% PREMIUM on my original quote?
This seems outrageous. I felt bait and switched. I told them I wasn't happy with this new price, and then they told me this:
We can do a full body check up in two years, and if your cholesterol goes down to below 4.0, we will honor the original $181/month price. But in order to do so, you must sign up for the policy today at $226/month. Further, we will be contacting your general practitioner to get your medical records for the past several years.
Great, another blood test in two years. Hmm, why do I feel completely unsatisfied with the answer? It's almost as if I was scammed because I had to go through the uncomfortable process of giving blood.
If I didn't have to go through the process and just got a phone call a week later saying the price had increased due to their background check, I wouldn't be too annoyed. Then the agent went on:
We will beat any and all providers. Thanks for your time and we'll be in touch after we have received all your health records.
Don't Expect To Get The Best Life Insurance Quote
Just like how car dealers advertise the lowest price on a car to lure you in, life insurance providers will quote you the lowest life insurance premium price to get you to commit to the application process. But when want to buy a car, you don't have to give any blood to go for a test drive.
If my insurance provider said a 25-year/$2M policy cost $226/month, I may not have bothered with the blood work. Or more likely I would have gone with a smaller policy to get the figure under $200/month. At $226/month, that adds up to $2,712 a year or $67,800 in life insurance premiums I'd end up paying over 25 years.
Additional Life Insurance Quotes
Here are some quotes I got for smaller policies from my existing provider. They said I can always lower the amount and pay less in the future, but I can't increase the amount. With their new quote, they are basically charging me for the price of a $2.5M, 25-year term policy.
Amount: $1M
Cost: 25 term years – $92/month, 20 years – $62/month
Amount: $1.5M
Cost: 25 years – $136/month, 20 years – $91/month
Amount: $2M
Cost: 25 years – $181/month, 20 years $120/month
Amount: $2.5M
Cost: 25 years – $224/month, 20 years – $149/month
Amount: $3M
Cost: 25 years – $269/month, 20 years $179/month
If you're looking for life insurance, just expect the premium you are quoted could be higher by 20% – 40% after you do the blood work, if needed. If the premium doesn't rise, consider yourself lucky!
The silver lining about the process is that I didn't have to leave my home, I got free blood work done, and I know I'm in top shape for 19 out of 20 health criteria they look for (they wouldn't tell me the categories). Now I can focus on lowering my cholesterol to live a healthier life.
Always Shop Your Quote Around
Because I shop for life insurance once in a blue moon, I didn't know whether $226/month is a good or bad price. All I knew is that it was 25% higher than what I was originally quoted.
In addition, because I've been with my provider USAA for almost 20 years, I just trusted them to give me the best quote possible. After all, members have either served their country in the military or are children of those who have served.
To find out whether my USAA quote was competitive, I went onto PolicyGenius to get various 25-year/$2M quotes and compare the results to my original $181/month quote.
PolicyGenius is a life insurance marketplace that uses technology to get you the most custom quotes based on all your variables in one place. I've met both of the founders multiple times and really like the pricing discovery they are providing for consumers in an incredibly opaque industry.
More Life Insurance For Less Money
The process on PolicyGenius took me less than two minutes. They came back with 8 quotes, with the following two as the lowest and most appropriate: $170.04/month from Pacific Life and $172.62/month from AIG.
Later, my wife also went onto PolicyGenius to compare life insurance quotes. She ended up purchasing a new, better policy through Policy Genius. Now she has more life insurance coverage for less money. Talk about a win, win!
I'm also glad that my original $181/month quote wasn't too far out of line. Now I plan to either go with one of these two providers or use the quotes to have my current provider lower their price since they did say they will beat any price.
One Last Life Insurance Twist
There's one good thing about being born before the internet was created. It's hard for life insurance companies to know everything about you.
When I was living in Taipei in the early 1980s, I suffered from asthma. The air was terrible back then, and it still is now. One day I woke up with red spots all over my body and I couldn't breath. I was rushed to the hospital, given an IV, and stayed there for at least one night. When I woke up the next morning, my entire body had turned red!
Not being able to breathe is a scary feeling, and I'm fortunate I haven't had an asthma attack for over 30 years. A stronger immune system and a cleaner environment must have everything to do with it.
I was curious to know how my life insurance premium would change if I said I had asthma 31 years ago with no asthma attacks since. Here is the second set of results from PolicyGenius:
Suddenly, my $226/month life insurance policy doesn't look so bad! I assume USAA did all the due diligence they could to find the lowest price possible while still being able to make a profit.
They wouldn't tell me what the other 19 variables were they were checking for. So I'm wondering whether I was supposed to tell them about my asthma attack from when I was 9 years old.
Protect Your Family With Life Insurance
I'm always going to believe that getting life insurance is the right thing to do if you start a family. Just make sure you get the appropriate amount of life insurance for the right price.
The internet has helped create better pricing discovery so we don't get ripped off. Stay healthy my friends!
Related: Life Insurance Needs When Having A Baby
Update: I ended up telling a USAA agent that I had an asthma attack and was hospitalized 31 years ago, and she said nothing changed in my quote. They want to know whether I still have asthma now and they are only looking at my medical records from the past five years.
Further, it's important to know that typically if you don't die within 24 months of when you get your life insurance policy, life insurance companies don't have grounds to deny payment unless they go bankrupt. Double check with your carrier.
Readers, what are some other examples of bait and switch you've experienced when attempting to buy something? Should vendors be more clear? Why do you think life insurers are so opaque when it comes to their underwriting criteria? Should we disclose more health information if the insurance providers do not ask?
I’m so glad you mentioned Policy Genius. Last month I was thinking about getting a life insurance policy and had no idea where to start until I read an article you wrote about how much life insurance to get that mentioned them. I tried out their free quote tool from the homepage and was surprised how easy it was. I did it while watching TV haha. I was able to get a policy that didn’t require a health exam too. They just used my medical records and health questionnaire. I should have signed up years ago, but fortunately I’m still here so it all worked out okay. My new policy just activated last week. First new years goal – check!
Late to the party on this one, and about to write a post on my blog about it – but curious your thoughts…
I’m a 35/female flat out denied coverage by all but one insurer because of my history of depression and anxiety (I did go on a short disability for PPD after the birth of my first child) — for some reason one agency is willing to give me a policy (they’re probably the smart agency since they can charge me an arm and a leg and they know I’m really NOT high risk for having a history of depression since they have all my bloodwork and everything else came back normal!)
I hate paying extra to a company to be covered but as you (and my CFP) note this is for my family, not for me. Needless to say, I’m really depressed about this situation agh rs my insurance shouldn’t cost this much, and I’m pissed that seeking treatment for mental health challenges = you’re high risk. I’d think NOT being treated would make you MORE high risk. Anyway, what policy do you think I should get? Looking into laddering and getting some more information. We’ll probably buy a house with a 30 year mortgage in the next few years and the house alone will be $1.5M-$2M (plus interest) so I wonder if this is even enough… at what point does it make sense to self insure?
$800,000: 20-Year Level Premium Term:
$891.00 / year
$1,500,000: 20-Year Level Premium Term:
$1,560.00 / year
$800,000: 30-Year Level Premium Term:
$1,091.00 / year
$1,500,000: 20-Year Level Premium Term:
$1,965.00 / year
I’ve held off on commenting on this topic, but have done enough research that I feel annoyed. My FA convinced me to purchase whole life insurance at $2M, and my payments are a little over $3K a month. This is ridiculous. He used the strategy of “risk management” and “cash value”, which is all non-sense now that I’ve looked into things a lot more. I’m better off changing to term life insurance, and investing the rest (BTID, as they call it). I’ve had it for a little over a year, and the cash value has only grown to $2,464, and I’ve paid over $36K in the last 12 months… makes ZERO sense!
PLEASE do an article on whole and/or variable life insurance being utilized as investment tools. I personally am a fan of the tax free loan aspect of the cash value during retirement. I don’t even care about the 1.5M death benefit I have although its a nice bonus, but not the reason I own this vehicle. ALSO the government cannot tax monies inside of life insurance upon your death, as it is not subject to the death tax, nor is the death benefit subject to income taxes.
Many Many multimillionaires and billionaires utilize whole and variable life insurance as one of their investment vehicles, and borrow out money tax free and sometimes paying themselves back with interest..
Lastly, there are certain protection that these plans provide in cases of divorces and ex-wives.
Sam, I’m also a USAA policy holder for Bank and property/casualty insurance. They usually give discounts for bundled policies. Did USAA offer to lower your other contracts premiums if you take the term life insurance?
Nope. I’m also a multi account holder in USAA too. It is a wake up call to get more healthy, b/c my premiums went up even further after this post. So I’m gonna pass! Get fitter. Eat better. And try and make as much money as possible until my $1M term policy disappears in five years. Goals!
1) Sam, you likely never had asthma. Plenty of people can have an episode of wheezing secondary to illness or environmental exposure. To truly have asthma, you would typically have repeatable symptoms over time (I’m a recovering pulmonologist). Your childhood hospitalization wouldn’t/shouldn’t have an effect on actuarial tables. The potential increase would be based on the insurer thinking that you have current and actual asthma, putting you in a higher risk category.
2) I’ve been a USAA member for 27 years. They have never, ever been the least expensive option for the majority of their products, whether it be loans, or any type of insurance. Their customer service has been outstanding, in my opinion. In addition, companies like USAA bank on customer loyalty, and will increase premiums over time knowing that most customers won’t complain and wil stay with them out of inertia, thus increasing profits.
3) All insurance companies live and die by actuarial tables. It makes sense, even if it seems somewhat arbitrary, but trying to project outcomes in 25 years and likelihood of a payout can certainly be affected by many factors. I dont think it’s surprising that simply having a slightly elevated cholesterol put you into a higher risk category- slightly higher now at a young age could snowball over 25 years if you aren’t careful. Much like how you approach financial risk stratification and not knowing exactly what will happen with future markets, life insurers need to conduct their own risk stratification based on historical data of lots of people and how they die over time.
4) Be glad you’re healthy- I’ve recently been denied life insurance by USAA and others, and have to rely on a veteran’s life insurance plan of $400k and a 20 year term $500k policy I bought back when I was healthy 12 years ago. It can cover my mortgage and pay for college for my 2 high school age boys, but that’s about it.
Thanks for your thoughts. It’s a wake up call for me to lower my cholesterol and eat healthier.
I told USAA about my asthma attack on 31 years ago and they said it’s fine. They’re just looking for records over the past five years.
What happened to your health that caused you to get denied completely? How old are you now? Getting denied seems pretty harsh.
I’ve unfortunately had multiple different health crises that led to me retiring from the military, including ulcerative colitis (leading to a permanent ileostomy), a clotting disorder with a high risk of stroke, and diabetes. I think the biggest issue is that I’ve had several dangerous clots already, including a pulmonary embolus. While I could theoretically buy disability insurance, it would be both prohibitively expensive and likely useless, as the only things it would cover would have to be completely unrelated to my current health issues, like a car crash. I’m 48, and thankfully I’ve got my veteran’s life insurance policy and another term policy that lasts for another 8 years or so, but I’m worried that it’s not enough. Even worse would be if I were to have a stroke that doesn’t kill me, but permanently disables me. We’d be financially hosed… Sounds morbid, but my family would be far better off (financially at least) with me dead than permanently disabled….
I’d recommend playing more tennis and cutting back on anything with cream, and switching to extra virgin olive oil to lower the cholesterol. I have term life insurance thru work and it’s about 5x my salary so way more than enough to pay off my mortgage and then funds left for my son’s college. i don’t remember the cost per pay period but it’s fairly cheap. But I may increase the coverage some more.
My business partner and I each have $1 million 20 year term coverage with the company as the beneficiary. The design of that is to help cover some of the cost of buying back the shares in the business from the spouse of the deceased. Company pays the premiums and they are pretty expensive – $2,605 a year for mine – but also a deductable expense.
I have $1.25 million personally with wife as beneficiary and we have $1M on her with me as beneficiary. Mine costs $925/year and hers costs $421.20/year. Both those 10 year term policies are up for renewal early in 2018 so I am debating what to do. Might drop to $500 on me, $250 or $0 on her as we are FI and the cash would just be a buffer during the first year while settling equity buyout from the company.
I have 3 life insurance policies, wife has one, all through SelectQuote and this has never happened. I take out a $500,000, 30 year policy every 5 years, and have a 10 year policy too. I am 42 and pay around $400 – $500 a year, les for 10 year, though I started them a few years ago
I like to get the blood work etc done. It’s like a free physical and always seemed more thorough then the 30min Doctor checkup with no structure.
I’ve laddered a bunch of policies and been happy to match my debt and commitments to my life insurance. Even though I don’t technically need the insurance it’s a low cost way to make the event of my early death would be completely stress free on the money standpoint. This way I can invest in less liquid projects and be comfortable that the downside is managed.
Hi Sam,
Great article. It’s crazy how much insurance companies can get away with and I’m surprised they don’t have to provide any transparency on their underwriting criteria. As a 27 year-old guy I haven’t really considered life insurance since at this point in my life I’m too busy partying and chasing girls =). However, its probably something more people my age should take more seriously, especially while we can get in at lower premiums.
-Dan
Pull the trigger on something, life changes so fast. I had a medical issue that occurred recently, so the only policy I will have is what I got when I was 19! I got the super best rate on that one of course, how much healthier could I be than back then? I was an unpaid intern at a financial company and was able to run all the quotes so I handpicked exactly what I wanted. $300,000 seemed like a lot back then, but definitely not anymore. Fortunately I supplant with what my employer provides.
Moral: if you want it buy it while you still can.
And there is a reason why people get permanent insurance rather than term.
You may be a good candidate for credit life insurance if you are about to enter into a mortgage.
Have you thought about laddering policies? Overlapping a few to provide the highest coverage for the years with the highest needs, then letting it taper off some (cost-wise too) over time? Sometimes that saves money, and sometimes it doesn’t. Might be worth researching.
We can’t really compare apples-to-apples because of age, health, location, etc., but my $750k term policy is $69/month. Three of those would meet your needs at the same cost. But if you shorten the term on one, it’s rate goes down. Then shorten even more on the third and it should be even lower.
Maybe you do a 10, 15, and 25 or something? Assuming you might have less debt and higher net worth to cover an unexpected early death over time?
Just a thought.
Your policy sounds like a pretty similar cost to my policy, so that’s reassuring.
If I take out a new 25-year term policy, I’m kind of like laddering since I have another 5 years left on my current policy.
It’s a good idea Brad. I may just skip this policy, and just get another policy in 5 years when my current one runs out. I’m assuming my wealth will be higher in 5 years than today, knock on wood, which means I would need less insurance in the future. I’ll also be motivated as heck to stay in shape.
34 year old male in good health.
I got a thirty year, $2 million term-policy for $155/mo
Seemed reasonable. I worked with a broker who told me that essentially no-one qualifies the teaser rate so we made our assumptions on the mid-tier when shopping around.
Life insurance is a STEAL compared to disability insurance. That is a racket.
Yup – I pay $2,970/year for disbility coverage that would pay out $6,700/month. Got this coverage when I was 38.
Are you talking long term disability or short term disability? My supplemental LT disability insurance is pretty cheap at just under $300/year.
This is exactly why you need a good agent…. Every company is slightly different in regard to what they think is acceptable as far as cholesterol and other health issues. You can very easily apply with a company that has looser guidelines and forward your results over for review. If you are healthy enough, you can get the premier rates. Either way though, any agent or quoter that uses preferred plus/premier as the quote they show should be slapped. Especially without showing the other rate classes. Telling people to expect a higher price than is quoted, isn’t even close to realistic though. A good independent agent will tell you the price you should be qualified for based on your height/weight and medical history and which company is most likely to give you a favorable outcome. Also, if there is anything questionable, they will write a cover letter with your application which can help with your approval.
Sam, What are your thoughts on Whole Life insurance plans as both an insurance policy and an investment vehicle for passing wealth on to your heirs? The annual cost might be substantially higher, but that expense will inevitably be recuperated. Furthermore, you may be able to borrow against the plan to ease cash flow constraints.
This might be a discussion topic for another article.
I too would love to hear thoughts on this. I have both permanent/whole and term life insurance. I think the answer is dependent on a person’s income. If you are eligible for other tax advantaged retirement savings then whole life insurance may not make sense. However, if you’re a high income earner who either cannot contribute to a Roth (even backdoor) or just wants additional saving options then whole life insurance makes sense. Just be sure to choose a manageable premium level that you can maintain even if your income takes a hit. I just went through a job loss but will be ok with my whole life premium for a year without needing additional income.
Have you already made a decision on what to purchase?
Ugh that’s the worst. I need to switch my life insurance around too, so this information is quite timely; thanks.
As a quick data point, I just went through the process on a term policy also w originated quotes thru Policy genius and placed with PAC Life Like you, qualified for their highest preferred quote status, and post blood work and home visit, they honored the same price. $45/Mon for 20yr $1M policy. Age 37, avid runner, very healthy
Btw, first time poster but absolutely love this blog, exceptional content. Thank you!
Your policy almost exactly mirrors mine and my wife’s.
Mine: $500k 20 yr $23/month Pacific Life
Yours: $1M 20 yr $45/month Pacific Life
Looks like prices scale linearly with increases in coverage amounts.
I guess location isn’t as big of a factor as age and health. (I am also a runner, and healthy. Wife was 37, I was 36 when we initiated the coverage)
Let’s hope your life insurance provider doesn’t know about your blog or you might just see your future life insurance quotes permanently increase due to asthma!
I haven’t been too concerned about life insurance yet. Having no debt nor children certainly helps, and I know my wife would be fine financially if I were to pass (she earns more than I do anyway). We have basic life insurance from our employers health coverage, but it’s only 2x salary which would only last for a year or two before being used up.
Maybe once I’m older I’ll concern myself with life insurance. I had no idea they did such extensive testing but I suppose it makes sense.
I had a recent experience with State Farm which I would call a bait and switch. I just wanted some quotes for term life. They gave me some. Once I started the underwriting process (blood draw, etc.) they started charging me premiums (even before I had decided.) They said, well you can cancel. Underwriting came back, premiums rose significantly (not surprising to me–I have an autoimmune disorder which the agent said wouldn’t make any difference) and then I had to call back and say I didn’t want the policy. Second hard sell. And took couple months to refund the 2 premium payments I had made. Really poor way to do business IMO. Never again. Cancelled all State Farm insurance I had (car,home) after that.
Just for the sake of more information for you…
My wife and I each got a 20 year term life policy from Pacific Life. For $500k each.
We each equally contribute to the family income and were looking for enough to put the kids through school and keep them happy/healthy if something should happen to one of us.
We are both healthy and in our late 30s. Surprisingly, after doing the blood tests and answering some questions (no, I don’t engage in dangerous activities. I have no plans to bungee jump or jump out of an airplane.) we qualified for the prime rate. We pay $560 per year for both of our plans together. Or, $280 each, or $23 per month.
Assuming the costs would increase linearly (which yours appear to be close to) that would amount to a $2.5M policy costing us approximately $116 per month.
I wonder if your residence affects your cost? We live in Pennsylvania.
We also are a few years younger, although not much.
And this is for a 20 year policy, so there’s an extra 5 years when you are 60-65 that we are not getting coverage for, which I’m sure would have a higher chance of death, which you are locking in the $180 a month for. I wonder what it would cost us for a 5yr $500k policy when we are 60…
Thanks for sharing. Prices don’t move in a linear rate as we age. It’s why many are you to lock in a quote at a younger age.
Think about ensuring a 95-year-old man versus ensuring a 48-year-old man. Price will be way more than double, if not uninsurable.
Price will be way more than double, if not uninsurable for the 95-year-old.
I had a “fun” experience with an insurance company. It was for annual renewable term life. I just wanted to renew my policy. The rates went up which I expected when I turned 50. At the time, the insurance was through the firm I worked for. It was for about 2.5m. Anyway, they said due to the amount and my age, I needed to go through “their process”. They sent a nice lady to my home. They asked me a million questions. I answered them. I had some stomach issues which had improved and my cholesterol was a bit high – 213 overall but I had a good CHL of 60 so my ratio was OK. Well, the phone calls and letters from the insurance company were never ending. I kept giving them what they wanted but they always wanted more. Finally, I said screw it because I had a $1,000,000 life ins policy outside of work and I was able to keep my $1,000,000 policy at work no questions asked. I still have a $500K policy although I am getting close to the stage where I can decrease that. Make sure children’s education and the mortgage are handled. Then, make certain cash flow is sufficient. Lastly, remember that the expenses do go down if you are not there! Except for child care costs if your kids are very young.
This is important information. In hindsight if you knew this was a possibility you could have asked your doctor to have the blood tests performed ahead of time (like during a yearly physical). Then you could have corrected your high cholesterol through statins. This would have saved the monthly premium on the life insurance and you would have been healthier overall. We get our life insurance through our employers. This is another benefit of working for a company even if you are financially independent.
Sam, you are entirely self insured and should not be spending anything on this type of insurance, in my opinion. I dropped a multi-million dollar term policy after reaching similar status and circumstances.
A good broker will never use bait and switch and will do all this leg work for you. I do say though that people do need to research the way you have, because knowl edge is power.