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Should you buy a life insurance policy through Costco?

The membership-only store offers a life insurance policy that might be worth considering for people in good health.

Nupur Gambhir

Nupur Gambhir

Published March 10, 2020

KEY TAKEAWAYS

  • Costco members can use their membership to get a discounted life insurance policy through Protective Life Insurance

  • The Costco discount only applies for the first five years of the policy term, after which the premium payments return to their normal price

  • Purchasing a life insurance policy through Costco might be cheaper for healthy individuals, though it may not be the most cost-effective option for people with a more complicated medical history

  • Anyone purchasing a life insurance policy should shop around to find an insurer that offers the best rates for their individual circumstance

Most people know that for food, furniture, and supplies, Costco is the one-stop shop for wholesale deals for its members. What you might not realize is that you can use your Costco membership to save on different types of financial protection as well. Costco offers discounted travel, health, auto, and life insurance to its members.

But when planning for the financial security of your loved ones, should you consider purchasing a life insurance policy through Costco?

While Costco life insurance might offer low prices for someone in good health, the discount only lasts for the first five years of the policy and there is only one policy option. Most people are better off working with a life insurance broker to find a policy that caters to their specific needs at a competitive price.

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Life insurance at Costco

Does Costco actually sell life insurance? The answer is no — purchasing life insurance through Costco doesn’t mean you’re purchasing a Costco branded policy. Costco’s life insurance page leads you to a partner company, Protective, a reputable life insurance company on the market.

If you opt to purchase a life insurance policy through Costco, you’ll be redirected to the Protective website and will work with a Protective agent during the underwriting process, which is where you give the insurer information about your background and medical history so that they can determine what you’ll pay in life insurance premiums.

If it’s not actually Costco life insurance, then why purchase through Costco in the first place? Costco members get the perk of discounted policy premiums for the first five years of their policy. During the sixth year, the premiums increase to their normal pricing and remain the same for the rest of your policy.

Protective Life Insurance

Costco’s life insurance offering through Protective is term life insurance, which is typically the most affordable type of life insurance. Term life insurance policies last between five to 30 years — your life insurance premiums stay the same throughout the duration of the term. If you purchase a Protective life insurance policy through Costco, you can choose between either a 10 or 20-year term.

Is Protective a good life insurance company?

How does Protective life insurance rank against other life insurance companies? Pretty good, for the most part.

Protective has lower than average costs across the board, allows you to manage your policy online, and it offers rate reconsideration after you’ve had the policy for a year. Individuals who aren’t in optimal health might not see rates as low as other Protective customers, but they could still pay life insurance premiums at a fairly competitive rate.

On the downside, Protective tends to have a slower-than-average application approval and the policy cannot be canceled online — Protective requires a phone call for policy cancellation.

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What do you need to know about your Costco life insurance policy?

There a couple of key stipulations that accompany a Protective life insurance policy through Costco:

  • Coverage availability varies by state and is not offered in New York
  • The Costco discount is on average 15% and only applies for the first five years of the policy
  • If you need to increase the death benefit amount after you sign for your policy, you will need to prove your financial viability
  • If you need to decrease the death benefit amount after you sign for your policy, you can do so after the policy’s third year and should expect a policy minimum coverage amount
  • Because the policy and underwriting process are ultimately decided by Protective, not Costco, a Costco membership doesn’t automatically qualify you for Protective life insurance coverage

Is purchasing a life insurance policy through Costco cheaper?

How much you actually pay for your life insurance policy is dependent on multiple factors, including family history, health, and what you do for a living. That being said, Protective’s generally low rates coupled with a Costco discount make it easy to save on life insurance if you’re in good health.

Check out the table below to get a sense of how much you might end up paying for a life insurance policy through Costco versus the industry average.

AGECOSTCO COVERAGE AMOUNT OF $500,000INDUSTRY AVERAGE FOR COVERAGE AMOUNT OF $1,000,000COSTCO COVERAGE AMOUNT OF $1,000,000INDUSTRY AVERAGE FOR COVERAGE AMOUNT OF $1,000,000
25$14.35$21.76$22.35$35.55
30$14.71$23.02$22.85$37.43
35$15.49$25.68$26.30$42.63
40$21.25$33.80$36.74$52.72
45$32.10$47.53$58.43$86.33
50$46.73$71.68$85.26$132.64
55$73.97$108.88$138.66$209.21
60$117.53$192.52$228.42$361.92

Methodology: Sample monthly premium rates based on 20-year term life insurance policy for a non-smoker female in Preferred health rating; industry average quotes based on policies offered by Policygenius in 2020.

Should you buy a life insurance policy through Costco?

While purchasing a life insurance policy through Costco might be the most cost-effective option for some people, it might not be the best policy option for everyone.

For starters, your life insurance policy should be able to cover your outstanding debts and future anticipated costs. For example: if you have a 30-year mortgage, Protective’s 20-year policy offered through Costco doesn’t offer the right type of coverage to make sure that you and your loved ones are totally protected.

Additionally, your only policy option through Costco is a term life policy. But if you need a permanent life insurance policy — maybe you have lifelong dependents — you’ll need to look elsewhere to find a life insurance policy that caters to your particular circumstance.

At the end of the day, every life insurance company treats each individual circumstance differently and you won’t know exactly what premiums you’re going to pay until you go through the underwriting process and receive a final policy offer. While a Protective life insurance policy coupled with a Costco membership discount is pretty affordable if you don’t have a complicated medical history, the discount only lasts for the first five years of the policy and the initial rates given by Protective don’t account for anything that might come up during the underwriting process. The best way to find the right policy for you is to shop around with different carriers before you commit to purchasing life insurance.

Insurance Expert

Nupur Gambhir

Insurance Expert

Nupur Gambhir is an insurance editor at Policygenius in New York City. Previously, she has worked in marketing and business development for travel and tech. She has a B.A. in Economics from Ohio State University.

Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.

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