6 signs you're overpaying for life insurance
- Never having compared quotes across insurers is the single most common reason people overpay.
- A term that runs well past your mortgage or your kids leaving home is coverage, and cost, you don't need anymore.
- Riders and add-ons are sometimes worth it, but only if you can say exactly what each one does for you.
The short answer
You're probably overpaying if you bought your policy through a single insurer without comparing, you're carrying a term longer than your actual need, you have riders you can't explain, or your coverage amount was picked by a rule of thumb instead of your numbers. None of these mean your policy is bad, they just mean it's worth a second look, and most take five minutes to check.
Sign 1: You only ever got one quote
If you applied with the first insurer you found, or the one your lender suggested, you likely never saw what else was available. Rates for the same person and the same coverage can vary meaningfully between Canadian insurers. Getting one quote and buying it is like buying the first car you test drive.
Sign 2: Your term outlasts your need
Term length should match how long someone actually depends on your income, not a round number. If your mortgage is paid off in 14 years and your kids are financially independent by then too, a 30-year term is paying for 16 years of coverage you probably won't need. A 20-year term(or even 10) priced for the same coverage amount is usually meaningfully cheaper.
Sign 3: You picked coverage using a rule of thumb
"10 times your salary" is a starting point, not a number. It ignores your actual mortgage balance, debts, savings, and how many years of income your family would need replaced. Someone with a paid-off house and no kids needs far less than someone with a $600,000 mortgage and two young kids, even at the same salary.
Sign 4: You have riders you can't explain
Riders (add-ons like critical illness, disability waiver of premium, or accidental death) each add cost. Some are genuinely useful. If you can't say in one sentence what a rider does for you and why you paid for it, it's worth asking your advisor to walk through each one and what happens if you drop it.
Sign 5: You're treating it as an investment
Permanent life insurance (whole or universal life) can build cash value, but it's priced very differently than term, often several times more per dollar of death benefit. If you bought permanent coverage mainly hoping for investment growth, and not because you specifically need lifelong coverage, you may be paying a lot more than the protection itself costs.
Sign 6: You've never disclosed a health improvement
If you quit smoking, lost weight, or got a health condition under control since you bought your policy, your risk profile has changed but your premium hasn't. Insurers don't lower your price automatically. It's worth a new quote to see if you'd now qualify for a better rate class.
A quick example
Take a 40-year-old non-smoker man who bought $500,000 of 30-year term at age 35 mainly because an advisor suggested a round number and a long term. His mortgage will be paid off in 12 years and his kids will be financially independent in about 15. He's likely paying for roughly 15 years of coverage he doesn't need, on top of coverage sized by a rule of thumb rather than his actual numbers. Re-costing that same protection as a 20-year term, sized to his real mortgage and income-replacement need, often brings the monthly premium down noticeably, sometimes by close to half, without giving up any protection he actually needs.
Why this happens more than people think
None of this is usually anyone's fault. Life insurance is often bought once, quickly, sometimes bundled with a mortgage or through the first advisor someone talks to, and then never revisited. Circumstances change, mortgages shrink, kids grow up, health improves, but the policy from years ago doesn't update itself. A short review every few years, especially around a renewal or a major life change, is usually all it takes to catch these six signs before they cost you much.
What to do next
None of these signs mean you should cancel anything today. They're a checklist for a 15-minute conversation. Book a call to review your current coverage against your actual numbers, or get a fresh quote to see where you'd land today.
FAQ
How often should I re-shop my life insurance?
There's rarely a reason to re-shop an in-force term policy, since a new one prices at your current age. It's worth comparing again if your health has improved a lot, or before you renew at the end of a term.
Is it worth cancelling an old expensive policy to buy new?
Only after you have the new policy approved and in force. Don't cancel first, and compare the total cost and any new health questions before switching.
Does a broker cost extra?
No, in Canada a broker is paid by the insurer out of the premium you'd pay anyway, whichever insurer you buy from. Using one doesn't add a fee.
Philip Setter has been a licensed life insurance advisor since 2014 and founded Affinity Life in 2020. He's a climber, ice climber and ski tourer based in Calgary.