At last! After more than three years of deliberating what to do about life insurance, I finally got myself an affordable life insurance policy with no medical exam! If you’re looking to get the same, here’s how I did it. Let me share a bit of background first.
Back in January 2012, at the age of 34, I decided to get a 10-year, $1 million term life insurance policy. Because I had about $1 million in mortgage debt at the time, I thought getting a $1 million term policy was the responsible thing to do.
In case I passed prematurely, I didn’t want to saddle my wife with so much debt. She made about $120,000, which was not enough to comfortably afford a $1 million mortgage based on my 30/30/3 rule. Further, at the time I was determined to negotiate a severance and cut my overall income by ~80%. We were in a precarious financial position and I wanted financial assurances.
Back then, we also weren’t certain whether we wanted kids either. When you light your earnings on fire, starting a family is generally not top of mind. Adapting to a new financial normal is. Therefore, I got a 10-year term policy, which I thought was long enough to pay off the mortgage or sell the house.
Not A Long Enough Life Insurance Term
Unfortunately, I miscalculated my future. Although I did end up selling our house with the big mortgage in 2017, we also bought another house in 2014. Then, we miraculously had our firstborn in 2017.
In preparation for the birth of our son, I decided to get a physical and see a sleep doctor for my snoring. I figured, given I hadn’t seen a doctor in years and we were paying $1,600+/month in health insurance premiums at the time, I might as well get my money’s worth.
After going to that new sleep center in downtown San Francisco, the doctors put me through a battery of tests. These tests ended up costing my health insurance company more than $5,000. In the end, the doctors said I had severe sleep apnea and that I would need a CPAP and regular visits.
I gave the CPAP a go for a month and couldn’t get used to it. I also stopped going to the sleep center because I found them to be way too aggressive. For example, at one visit the doctor suddenly stuck a big metal thing up my nose for several seconds without giving my prior warning. Then the center charged my insurance company $1,000 for the inspection!
Unaffordable Jump In Premiums
After our son was born in 2017, I decided to ask my carrier, USAA, if I could extend my life insurance policy for another 20 years. They said sure. About a week later, a traveling nurse came to my house to complete a medical examination and draw my blood. Then, after checking my records, USAA pointed out that my sleep apnea knocked me down two tiers.
The result? My quote for a $1 million term premium suddenly went from $40/month to $450/month starting at age 40! I was OK paying more given I was older and wanted a longer term. But not that much more. I told them thanks, but no thanks. Certainly, there was a more affordable life insurance option out there.
My 10-year term policy was set to run out on January 2022, so I still had time to weigh my options.
The Long Journey Towards Finding Affordable Life Insurance
To keep my top-tier health rating, one of my options was to convert my term life insurance policy into a whole life policy. It was an option my existing carrier proposed to retain my business.
The “Option A” universal life insurance would cost $958/month, $640/month of which would be used towards building my cash value. That’s a lot more than $39.99/month. Further, with this “Option A” plan, my beneficiaries would only get the death benefit amount of $1 million and not the cash value. That didn’t sound too great.
Then there was “Option B” universal life insurance, where my beneficiaries would receive my death benefit and accumulated cash value. With Option B, my monthly premium would go up to an impressive $1,660! $1,291 of the $1,660 would go towards building cash value.
Below is what the Option B benefit growth chart would look like if I took a $1 million universal life insurance policy out at age 42 in 2020. If I died after 21 years at age 63, my beneficiaries would get $1 million + the $474,904 year-end cash value, totaling $1,474,904. Much better.
Forking out $1,660/month in universal life insurance premiums felt like too much. Instead, I decided to just invest the difference for more flexibility. In retrospect, investing the difference since 4/21/2020, when I got the policy quote, turned out to be a good move. My cash value would have returned up to 4.25% a year, underperforming a blended portfolio.
Didn’t Want To Do A Health Exam Again
When COVID began in early 2020, my wife decided to shop around for life insurance coverage to match mine. She had a $500,000 policy at the time, which was half the size of my existing policy.
In the end, Policygenius, found her a life insurance carrier that was able to double her policy for less than what she had been paying for the prior six years. In addition, she didn’t have to do a medical examination.
Therefore, I was emboldened to try and see if I could get an affordable lifestyle insurance policy. Several years had passed since my last medical exam so I was curious how I’d be quoted.
When I filled out my information, it asked whether I had sleep apnea. I checked yes. Given I also wanted a $1 million term policy for 20 years, all the life insurance carriers that provided a reasonable initial quote wanted me to do a health exam.
Due to the pandemic and my aversion to needles, I decided not to go through with the process. I still had time until my policy ran out on January 2022. Undaunted, I came up with a final plan!
Instead of going through another medical exam only to potentially get disappointed with the offerings once again, I decided to go through another sleep study. The idea was to prove that my sleep apnea was actually mild and not severe like the overzealous sleep center reported back in 2017.
New Plan To Get Affordable Life Insurance: Prove My Good Sleep
Since the beginning of 2021, I’ve been sleeping much better – a consistent 6 hours straight. I’d wake up rested then I’d take a nap after lunch. Therefore, I truly believed if I had sleep apnea, it was very mild.
To first test out my hypothesis that I only had mild sleep apnea, I asked my wife to observe my breathing for 30-60 minutes after I went to sleep. We did this several times and at various stages of my sleep cycle. During her observation, she didn’t notice any stoppage in breathing.
Due to my wife’s observations, I decided to go to an Ear, Nose, & Throat doctor for a checkup. Then I had him order a sleep study. I figured there was no downside to seeing a doctor or doing another sleep study since the insurance carriers had already lowered my health tier.
After picking up my sleep study equipment and doing the monitoring at home, I waited about a month for the results. Then I went back to my EN&T doctor who confirmed I had mild sleep apnea!
Finding The Solution With Empathy And Slightly Lower Coverage
I specifically told my doctor that I did the sleep study mainly to apply for affordable life insurance again. Further, I told him I just had a baby girl at the end of 2019 and needed to protect her. As soon as I told him this, he emphasized the world mild in my chart.
Now that my sleep apnea was confirmed as mild, I decided to apply again on PolicyGenius to see what I could get. I was given two options: 1) Principal and 2) Savings Bank Life Insurance (SBLI).
Principal is what my wife went with, but they wanted me to get a health exam if I wanted a $1 million policy. SBLI, however, ended up OK with me not doing a health exam if I got coverage up to $750,000. Therefore, I decided to go with SBLI.
If you’re looking for a no-medical exam life insurance policy, you should also be able to get one if the death benefit is under $1 million.
SBLI Cost For A $750,000, 20-Year Term Policy
Below is the $750,000, 20-year term life insurance policy I was quoted from SBLI. The monthly premium is $110.24 and the annual premium is $1,322.90.
Although $110.24 isn’t dirt cheap, on a more apples-to-apples basis, it’s much cheaper than renewing with USAA at ~$380 if I also got a $750,000 term policy for 20 years.
If I had initially gotten a $750,000, 30-year term life insurance policy in 2012, it may have cost me $55 – $60 a month versus $40 a month for the 10-year, $1M policy I got. So essentially, my mistake of improperly forecasting my future will cost me about $50 more a month minus $20 a month for the 10 years I only paid $40 a month. That’s not bad given our net worth is up a lot since 2012 thanks to a raging bull market.
I don’t feel like paying $110/month for life insurance is a lot at all. In fact, I feel like it’s a great bargain based on my current stage in life. The value of my life insurance is much greater today. It now goes towards supporting my wife and two young children versus just my wife pre-2017.
If you’re younger, please learn from my mistake. The best age to get life insurance is around 30. And the best term duration to get at age 30 is 30 years. At this age, it’s like locking in a 30-year fixed mortgage at an all-time low. Life tends to get much more complicated after 30.
The Financial Game Plan Going Forward
The main reason I got a new life insurance policy is because I have two kids. In 20 years, both kids should be done with college, if they go. At this point, I’m hoping they’ll be financially mature adults.
Another reason why I renewed my life insurance policy is because we bought our “forever house” in 2020 with a large mortgage. Therefore, in case something were to happen to us, life insurance helps cover this liability.
Since $750,000 doesn’t cover all our mortgage debt, my financial game plan going forward is to live long enough so that our mortgage debt gets under $750,000. Once our mortgage debt goes below $750,000, the next plan is to keep on living!
Technically, we can self-insure now because we can sell our investments to pay our mortgages if necessary. However, our general investment philosophy is to buy and hold for as long as possible.
Selling our investments would create an undesired tax liability. Hence, life insurance also acts as a tax shield, especially since the death benefit is also tax-free.
The next 20 years will be the most important time of our lives. Therefore, I’m thrilled to finally solve my affordable life insurance problem!
Life Insurance Premium After The Initial Term Is Up
One of the interesting things I came across in my new life insurance policy is what the total annual premium would cost after my 20-year term is over. Definitely inquire what yours will be as well.
As you can see in Policy Year 21, when I’m 64, the Total Annual Premium rises from $1,322.90 to $33,019.50! The difference is an impressive $31,696.6. Therefore, perhaps I should have got a 25-year or 30-year term instead. The one-year difference of $31,696.60 would easily pay for 20 more years of coverage.
Also notice how by the time I’m 84 years old, the total annual premium for my $750,000 policy would cost a whopping $391,512. But to get to that cost, I probably would have to pay the annual premiums in the chart every year since my policy expired at age 64. That wouldn’t be cost-effective at all.
When you’re deciding on a term length, it’s better to get a little longer than you think you need. You can always cancel in the future.
Keep Shopping Around For Life Insurance
The key to getting affordable life insurance is to shop around. I thought that USAA would have provided me with the best renewal rate since I have an existing policy with them. Further, I’ve been a client for 20 years. However, Principal and SBLI’s rates were so much lower. I wouldn’t have had any idea unless I checked online for comparison.
It is a little befuddling to me how prices and standards can be so different in the life insurance world. I guess every carrier has different risk levels at different times. The same thing goes for some banks who suddenly offer extremely competitive CD rates to capture more deposits. There are windows of opportunity every year.
At the end of the day, all we want is to feel financially secure. After creating my death file and setting up a revocable living trust, getting affordable life insurance was my last outstanding item. Now I can just focus on living!