Should I Buy Life Insurance at Costco?
Update: As of September 2019, Costco/Protective are no longer offering the universal life plan, Member Advantage Life UL Insurance. This article will discuss and review only the Member Advantage Life Term GS.
Quick Summary: Costco doesn’t offer its own life insurance, the policies are underwritten and issued by Protective. Applicants must qualify medically and Protective can be strict for many health concerns.
Members receive a discounted premium for the first 5 years and then rates increase later. Protective is a strong life insurance carrier but limiting yourself to only one option is not advised.
Advantages vs Disadvantages – Costco Life Insurance
Costco is an amazing place to shop.
From its discounted gasoline to its coveted Kirkland golf balls, the company offers a range of products at prices that often represent tremendous bargains.
But is Costco an ideal place to purchase life insurance?
The answer is somewhere between âit dependsâ and âprobably not.â
As we discuss below, one of the drawbacks of shopping at Costco — specifically, its limited assortment of brands and product options — is even more pronounced when it comes to its life insurance offering.
In addition, weâre not convinced that any mass-market retailer can offer the personal attention required to match each individual customer with life insurance suited to his or her unique needs.
What You Will Learn (click section link to jump ahead)
How Costco Keeps Prices Down
In 2016, Fortune reported that the average markup on a Costco item is just 11%, about half that of WalMart and a third of whatâs charged at a typical grocery or home improvement store.
So how does Costco undercut its competition by so much?
Some of the savings come from the no-frills, warehouse-like design of the companyâs stores. In addition, Costco spends virtually no money on advertising and public relations. And thereâs also the membership fee that Costco charges its customers, which ranges from $60 to $120 per year.
Did You Know?
Costco sells so much rotisserie chicken, it has developed its own farm-to-table supply chain, a network of Nebraska farms that will provide up to 2 million chickens per week.
Source
But perhaps the most significant way Costco beats its competitorsâ prices is the unusually narrow assortment of brands and products available at its stores.
âCostco warehouses carry about 4,000 SKUs (stock-keeping units) compared to the 30,000 found at most supermarkets,â the company says on its website.
âBy carefully choosing products based on quality, price, brand, and features, the company can offer the best value to members.â – About Costco.
Leverage Over Suppliers
This approach gives Costco extra leverage over its suppliers, who must lower the prices they charge Costco to gain that exclusive access to its shelves. On the flip side, Costcoâs narrow assortment means its selection of any given product is limited in terms of brands and options.
Now, a limited selection might not matter much for simple, commodity-type items like toothpaste or toilet paper — but itâs a big problem for a product as complex and important as life insurance.
And as it turns out, Costcoâs life insurance selection is limited to just one type of policy from just one provider of insurance.
Only Offers Life Insurance From One Carrier
Shoppers at Costco donât have a choice of life insurance providers. Instead, the one and only provider that Costco has partnered with is Protective Life Insurance.
Donât get us wrong — Protective is a reliable, highly rated provider with terrific customer service.
The firm earned the top spot in our ranking of the 10 best term life insurance providers. Over the years, weâve helped plenty of people establish policies with Protective, and weâre happy with the results.
About Protective
Since there is no such thing as Costco life insurance, we’ll detail the actual company issuing the policy and that is Protective.
Protective has been in business since 1907 and have total assets approaching 100 billion. They are a well-known name to consumers and a very stable company.
Financial Stability
Protective consistently earn top grades from all the major rating agencies as well as an A+ rating from the Better Business Bureau.
S&P
A.M. Best
Fitch
Moody’s
ComDex
JD Power
Customer Service
Policyholders will not be able to call Costco regarding their policy, you will call Protective. This is not a bad thing as they are known for having some of the best customer service in the life insurance industry.
As independent agents who work with and represent more than 50 different companies, we love Protective. We’ve written a full Protective Life Insurance Review that tells it all.
How Much Can You Save Buying Life Insurance at Costco?
The big selling point is that if you purchase life insurance through Costco, you can get rates for the 5 first years that are 10-15% less than Protective’s generally available rates.
Once the 5 years are up, the discount is gone, and you pay 1-3% more per year than regular Protective rates for the remaining years left on the term.
So, is Costco life insurance a good deal?
If you are comparing directly to the regular Protective rates, then yes, Costco life insurance is a good deal. However, being limited to only one carrier is not a good strategy. Depending on your health situation, you may find better rates at other life insurance companies.
Costco Life Insurance Quotes
The below chart contains sample rates for the Protective Life policy offered through Costco for Gold Star members on the 10-year term. Rates below are for non-smokers who are in excellent health.
10-Year-Term
20-Year-Term
Source: Costco Life Insurance quotes at Protective.com
About the Policy
The Member Advantage Life term policy is regular term insurance.
It’s only offered in 10 or 20 year term lengths. Many other term products with different providers have options for 15, 25, or 30-year terms. Banner even goes as long as 40 years.
The 10-year term is available for ages 18 to 75.
The 20-year term is available for ages 18 to 65.
The minimum death benefit, also known as the face amount, is $100,000. The maximum is $5,000,000.
See the official product guide from Protective about their term product here.
Available Options
You can choose to customize the policy further through several available riders which can be added for an additional cost.
Accidental Death Benefit RiderChildren’s Term Life Insurance RiderIncome Provider Option EndorsementTerminal Illness Accelerated Death Benefit EndorsementWaiver of Premium
The Big Problem
But while Protective is a great choice for certain people, itâs not the right choice for everyone. No one company is!
Like every insurance provider, Protective uses its own proprietary underwriting rules to develop its coverages and set its prices. These distinctive rules will favor some consumers and disadvantage others.
For example, Protective groups all forms of tobacco together, so if youâre not a cigarette smoker but do use another tobacco product, you might find a more affordable policy from a different provider.
Similarly, if you have certain health issues such as diabetes, sleep apnea, or GERD, Protective may not be ideal for you, depending on the specifics of your condition.
Generally speaking, Protective is a better fit for very healthy people and not those with any high-risks.
Overall, finding the ideal provider for you requires an evaluation of a wide range of variables. No single insurance provider offers all things to all people — but Costco only offers policies from Protective.
Not Only a Costco Problem
We hope it doesnât seem like weâre picking on Costco here, because thatâs not our intention.
Zooming out, weâre just not convinced that any mass-market discount retailer can offer the personal attention required to match each individual customer with life insurance suited to his or her unique needs.
You probably wouldnât go to a store like Costco to buy a custom product like a tailored suit or a wedding gown. So why would you shop there for life insurance, which is just as customizable as a suit or gown, and even more important to get just right?
Life insurance is a complex product that comes in many shapes and sizes. And every life insurance consumer has a unique set of personal and family characteristics that influence what he or she needs from an insurance policy and its provider.
Where To Get Help
With all that in mind, we believe the best way to shop for life insurance is to partner with an independent life-insurance specialist like us. Weâll help you figure out which type of life insurance makes sense for you — and which provider offers you the best deal.
Fill out a quote request on this page to get started comparing rates and we’ll be in touch soon to discuss your personalized needs.
