Should I Buy Life Insurance at Costco?

Ty Stewart - Founder - SimpleLifeInsure.com Written by Ty Stewart - Last Updated October 21, 2019

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

Pros

  • Backed by a strong insurance provider (Protective)  
  • Affordable term life rates
  • Discounted premiums for first 5 years
  • Excellent customer service
  • Good options for riders and policy extras

Cons

  • Rate increase starting year 6
  • Forced to work with one insurance provider instead of shopping around
  • Only offer 10 and 20-year term lengths
  • Not a good fit for people with health concerns
  • No GUL or whole life options available
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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 “it depends” and “probably not.”

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, we’re 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. 

Costco life insurance

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 what’s 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 company’s stores. In addition, Costco spends virtually no money on advertising and public relations. And there’s also the membership fee that Costco charges its customers, which ranges from $60 to $120 per year.

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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 competitors’ prices is the unusually narrow assortment of brands and products available at its stores.

“Costco warehouses carry about 4,000 SKUs (stock-keeping units) compared to the 30,000 found at most supermarkets,” the company says on its website.

“By carefully choosing products based on quality, price, brand, and features, the company can offer the best value to members.” -  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, Costco’s 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 it’s a big problem for a product as complex and important as life insurance.

And as it turns out, Costco’s 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 don’t have a choice of life insurance providers. Instead, the one and only provider that Costco has partnered with is Protective Life Insurance.

Don’t 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, we’ve helped plenty of people establish policies with Protective, and we’re happy with the results.

Protective life insurance

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 

AA-

A+

A+

A1

92

3/5

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

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Age and Gender

Schedule

$100,000

10-Year

$250,000

10-Year

$500,000

10-Year

$1,000,000

10-Year

30 - Female

Years 1-5

$6.31

$8.06

$10.91

$16.91

Years 6-10

$7.06

$8.93

$12.33

$19.13

30 - Male

Years 1-5

$6.54

$8.82

$12.69

$19.77

Years 6-10

$7.31

$9.99

$14.45

$22.53

35 - Female

Years 1-5

$6.31

$8.26

$11.84

$17.74

Years 6-10

$7.06

$9.14

$13.18

$19.98

35 - Male

Years 1-5

$6.54

$8.83

$12.98

$20.15

Years 6-10

$7.31

$9.99

$14.45

$22.53

40 - Female

Years 1-5

$7.08

$9.96

$15.20

$23.65

Years 6-10

$7.91

$11.27

$17.00

$26.78

40 - Male

Years 1-5

$7.62

$10.73

$16.77

$26.96

Years 6-10

$8.50

$12.12

$19.13

$31.03

45 - Female

Years 1-5

$9.08

$13.93

$22.39

$38.43

Years 6-10

$10.20

$15.73

$25.50

$43.78

45 - Male

Years 1-5

$9.92

$15.47

$25.67

$43.11

Years 6-10

$11.14

$17.43

$29.33

$48.88

20-Year-Term

Age and Gender

Schedule

$100,000

10-Year

$250,000

10-Year

$500,000

10-Year

$1,000,000

10-Year

30 - Female

Years 1-5

$7.13

$10.24

$15.44

$33.65

Years 6-10

$8.25

$11.90

$18.28

$40.38

30 - Male

Years 1-5

$7.81

$11.48

$17.59

$29.96

Years 6-10

$9.10

$13.39

$20.83

$35.28

35 - Female

Years 1-5

$7.68

$11.01

$16.19

$27.61

Years 6-10

$8.93

$12.97

$19.13

$32.73

35 - Male

Years 1-5

$8.19

$12.08

$18.90

$32.15

Years 6-10

$9.52

$14.24

$22.10

$37.83

40 - Female

Years 1-5

$8.82

$13.74

$22.31

$55.54

Years 6-10

$10.29

$16.15

$26.35

$65.88

40 - Male

Years 1-5

$9.81

$15.89

$25.85

$45.81

Years 6-10

$11.48

$18.70

$30.60

$53.98

45 - Female

Years 1-5

$11.53

$19.52

$33.70

$61.36

Years 6-10

$13.52

$22.95

$39.53

$72.68

45 - Male

Years 1-5

$13.81

$24.14

$42.90

$80.32

Years 6-10

$16.15

$28.48

$50.58

$94.78

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 Rider
  • Children's Term Life Insurance Rider
  • Income Provider Option Endorsement
  • Terminal Illness Accelerated  Death Benefit Endorsement
  • Waiver of Premium

The Big Problem

But while Protective is a great choice for certain people, it’s 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 you’re 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 doesn’t seem like we’re picking on Costco here, because that’s not our intention.

Zooming out, we’re 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 wouldn’t 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. We’ll 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.

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About Ty Stewart
Avatar for Ty Stewart
Ty Stewart is the founder of SimpleLifeInsure.com. He is an independent life insurance agent that works for his clients nationwide to secure affordable coverage while making the process simple. There is never any cost to use his services.

Posted in Life Insurance Company Reviews