Is Term Life Insurance Cheaper in the U.S. than in Canada?
Ami Maishlish has 39 years of experience with the insurance industry on both sides of the border. He is the president and CEO of CompuOffice Software Inc., a software firm that creates software tools and solutions for the insurance industry. His company is dedicated to promoting disclosure, openness, and fairness, with a focus on the best interests of the insurance-buying public. He is a tenacious consumer rights advocate and the creator of the most highly advanced and widely used LifeGuide Professional Software, which is used by thousands of Canadian brokers and advisors to assist their clients in finding the most suitable and best-value solutions. He is also the co-creator of the CompeteUS software, which is used by brokers and advisors in the US for the same purpose.
His international experience means that he is highly qualified to answer the age-old question, "Is Term Life Insurance Cheaper in the U.S. than in Canada?"
"The answer to that is one word — no," he says. "Canadian products are nearly all step-level term, meaning for example that a 10-year term will have a level premium for the first ten years, then the premium increases in year 11, for another ten years, and so forth. American products are a different animal entirely. They are nearly all Level to YRT — level only for the duration of the initial period, and then subsequently renew — if renewable — at yearly increasing costs. In other words, for example, a U.S. ten-year term is level for the initial 10-year period that is then followed by yearly escalating renewal costs, skyrocketing yearly from year 11 onwards."
The premiums can go up so much that that they could increase by 300 per cent in year 11. It gets to the point that by year 17 or 18, the premium cost could be equivalent to that of guaranteed-issue insurance. Under the American model, the assumption is that the client will be fully re-underwritten to requalify as a newly underwritten insured before the expiry of the initial level premium period, and those who don't requalify are those the insurance company doesn't want to keep, so they are priced out.
American term insurance can be described as "feeling comfortable during the initial period, but be prepared to requalify or suffer the pain of yearly skyrocketing insurance premium costs thereafter," says Maishlish.
"Insurance pricing is slightly higher in the U.S. than it is in Canada if you're looking at pricing overall " says Maishlish. "However, the initial premium is sometimes cheaper in the U.S. because of the structure of term life policies there. If you measure term prices by the initial premium, they may appear superficially cheaper in the United States than they are in Canada. However, in the long term they're more expensive."
Of course, if you only need the insurance for that initial period and will not renew at the end of the term, then yes, term insurance in the U.S. can be cheaper than term insurance in Canada — but only for the duration of that initial term period. Maishlish also stresses that each case deserves to be assessed and examined on its own merits and circumstances by a knowledgeable and consumer-interest–minded independent insurance advisor.