You can get an Apple Watch for only $25 ... with one small catch

  • John Hancock is making discounted Apple Watches available to life insurance policyholders enrolled in its Vitality program.
  • It charges an "activation fee" of $25, and from there, customers can earn the device for free through regular exercise.
  • Apple is increasingly turning to insurers as a sales channel for its Apple Watch.

John Hancock, one of the largest life insurance providers, is partnering with Apple to offer all of its new and existing members of its Vitality program a steeply discounted Apple Watch.

The program offers perks and rewards to people who live healthy lifestyles. Any consumer who signs up for the program is eligible to get the device for $25.

As long as Vitality members exercise regularly for two years, they will be allowed to keep the device for free. If they don't, they'll have to pay it off in installments. The Series 3 costs upwards of $299.

Hancock says it sold about 30,000 life insurance policies last year. It would not disclose Vitality's membership number.

Apple is exploring partnerships with insurance companies as a sales channel for its health and fitness-tracking Apple Watch. Apple recently held a series of meetings in August with health insurer Aetna to discuss giving out Apple Watches to its 23 million members.

The watch represents less than 5 percent of overall Apple revenue, analysts say, but it's starting to show significant momentumnow that the new Series 3 comes with cellular connectivity. Its enterprise push could represent a bigger chunk of sales over time, which would mirror Fitbit's trajectory.

An extension of an experiment

John Hancock, which is owned by Manulife, first started offering Apple Watches to a limited set of members — people who purchased life insurance policies over $2 million — several years ago.

After logging a 20 percent increase in activity under the program, it decided to extend it to all U.S. members

About half of the people who received the device achieved their monthly goals and did not pay for the device, John Hancock senior vice president Brooks Tingle told CNBC.

Tingle said it is the first life insurer in the United States to offer the Apple Watch as part of its policies.

John Hancock expects that the Apple Watch's appeal will help it attract new customers.

It recently surveyed customers of term life insurance and found that some 20 percent of them planned to buy an Apple Watch. It also found that 50 percent of people who did not have life insurance but recognized they needed it were more likely to buy it if they could get a discount.

The company has been criticized by privacy advocates for offering discounts based on physical activity. These perks are less likely to be extended to low-income individuals who are juggling multiple jobs and don't have time to get to the gym, as well as new mothers, experts have noted.

These people could end up paying the full cost of the Apple Watch over time.

Tingle said the company takes privacy seriously. "We have studied it a great deal," he said, adding that his team has taken pains to be transparent with customers about the price.

He also said it has "safeguards in place" to protect data from getting into the wrong hands, including employers that might penalize their workers. "We're clear with customers that we manage their data carefully," he said.

Clarification: An earlier version referred to Hancock's 10 million policyholders. Hancock says it supports about 10 million Americans with a broad range of financial products, including life insurance.

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