Group Term Life Insurance Options

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I'm sure this has been asked but I figure I start a new conversation plus I haven't posted in years.

So my company has decided to switched supplemental life insurance carrier. The rate is very similar to what I'm paying currently. However, I just realized that if I quit my job, my rates would go up on an individual term plan. Should I roll into the new group plan or should I start shopping for an individual term life plan?

Thoughts?

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Count26 said:   I'm sure this has been asked but I figure I start a new conversation plus I haven't posted in years.

So my company has decided to switched supplemental life insurance carrier. The rate is very similar to what I'm paying currently. However, I just realized that if I quit my job, my rates would go up on an individual term plan. Should I roll into the new group plan or should I start shopping for an individual term life plan?

Thoughts?

Certainly shop for an individual term life plan not tied to your job (or one that you will lose if you quit). Sometimes, you may qualify for a group plan through professional affiliation. That may not be bad, as long as you plan hold that professional affiliation for at least 20-30 years.

ETA: To the extent your employer gives you some "free coverage" (premium paid by employer), use the group plan. But that should not be the only coverage you have.

The supplemental life plan at my work is portable - you can take it with you if you quit or get fired.

If it were me, I'd:
1. Take any free life coverage from work.
2. Compare individual and group rates.
3. Confirm if my supplemental group policy was portable - and under what conditions (is it the same cost, etc.).

Usually group is more expensive if you are real healthy. It also frequently increases cost with age so you get a false comparison to level term.

dhodson said:   Usually group is more expensive if you are real healthy. It also frequently increases cost with age so you get a false comparison to level term.

That was another concern. I was under impression that rates are locked. Found out they go up over time due to age?

Yes. they go up by age. Ask to see a chart of the pricing for different age ranges and use that to compare to term.

If you can't take it with you assume it will be worthless when you get sick and have to quit working.

Count26 said:   Should I roll into the new group plan or should I start shopping for an individual term life plan?


Yes.

I consider group term to be an extra when planning. Don't count on it. Take what they give you for free, but if healthy, but whatever you need on your own. The group coverage is too uncertain. You lose it if you change jobs. Rates can and will change. Employer can drop the plan. Employer can go out of business. Unless you have difficulty getting good rates on your own, don't bother with your employer plan.

The only exception to migrating to individual coverage is if you need only a few years of coverage and rate is not too bad for your health group (vs. individual) and for your age group. Say you need only 3-5 years of coverage. A 15-yr term life policy may be more expensive depending on your health.

But otherwise, for the long term, if you're healthy especially, individual policy should be cheaper.

Just get 5 year term then.

dhodson said:   Just get 5 year term then.

Or 10 year term, which is often cheaper. Not many 5 year plans out there.

Here is a good starting point to getinfo
http://bestquoteinc.com/term-life-insurance-families/

Usually group is more expensive if you are real healthy. It also frequently increases cost with age so you get a false comparison to level term.
Re: more expensive -- Not true in all cases. For example, AICPA plan has three different rate tiers,depending on how healthy you are.
Re: increase cost with age -- Not hugely relevant if you plan to dial down your insurance coverage as you age & your need diminishes

They all have different rates based on health

It's rarely a good choice for very healthy to take group instead of individual term.

dhodson said:   They all have different rates based on health

It's rarely a good choice for very healthy to take group instead of individual term.

It's definitely not a good choice for insurance agents ...

Count26 said:   I'm sure this has been asked but I figure I start a new conversation plus I haven't posted in years.

So my company has decided to switched supplemental life insurance carrier. The rate is very similar to what I'm paying currently. However, I just realized that if I quit my job, my rates would go up on an individual term plan. Should I roll into the new group plan or should I start shopping for an individual term life plan?

Thoughts?


I own an independent life/disability and long-term care insurance brokerage, located here in San Diego, CA, and we are licensed in most all 50 states. We are a family-owned brokerage, who has been around for over 42 years and work with over 60+ of the nation's top "A" or better AM Best rated carriers on the market. We are fully unbiased and we only focus on these specific lines of insurance. We are also listed as a broker/agent onwww.Term4Sale.comand represent virtually all of the carriers that you see that site, with the exception of AAA, Northwestern Mutual, and a few others.

If you are still very healthy, then I would definitely encourage you to look into getting an independent policy - Especially if it's the same price as your current group policy. Group policies also tend to increase in 5 year age brackets, so although the policy may be the same price as locking-in an individual term policy now, chances are the group policy will continue to increase in cost, whereas, a level 10 or 20yr term will not change over that full term period. You will just need to ask HR for the Rate Tables for your group policy and run the numbers - The math doesn't lie.

There are a couple of group policies that come to mind that are just flat out overpriced, especially once you get around age 50 or 55. The 2 group policies that come to mind are AICPA, and FEGLI. The problem is, that many people don't even realize that they're paying too much, as they never shop it out and compare it to what they could find on the individual term market.

No one wants to pay more for insurance in general, let alone, term life insurance, so it's just foolish to not compare the rates. Please see the my full analysis below, which outlines the FEGLI policy that I mentioned above. The FEGLI policy is a great policy in the early years, but turns out to be a time bomb waiting to explode, once you get above age 50 or 55. We replace these FEGLI policies all of the time and end up saving our clients' a ton of money.

Here's the analysis that I made which is listed in this thread - https://www.fatwallet.com/forums/finance/1561791?showmessage=198... I have also highlighted the analysis below. Hope this helps.

You will need to remember that group/employer-provided plans are usually Guaranteed Issue policies, meaning that they usually do not require a medical exam and that anyone can get covered. What this means to you, is that the very healthy people like yourself can sometimes end up subsidizing the rates for the unhealthy people with Type II Diabetes, or heart issues, due to the fact that the insurance carrier cannot segment out and assess your individual mortality risk, as they can with an individual policy. Also, group policies tend to be more expensive than a standalone term policy, but you will just need to look at the rate tables for your particular policy and do the math in order to know for sure. Its essentially just basic arithmetic, but Ive included a sample comparison, along with a rate table below.

In addition, these group plans are typically not portable, meaning if you were to ever leave your employer, you could not take it with you. Group plans also usually increase in 5 year increments, meaning that you have to look at the rate tables (which you should be able to get through HR or your Employee Handbook), and do the cost-per-thousand calculation, based on each of the age brackets and their scheduled increases. As I've mentioned, the age brackets are usually based on 5 year increments (ie: 35-39, 40-44, 45-49, etc.), and always increase with age, due to increased mortality risk. You will then want to compare these cumulative forecasted group rates to what you can find through a standalone term policy through an independent broker.

For instance, the largest group policy is provided to all Federal Employees through our Federal Government, and it is called FEGLI (Federal Employees' Group Life Insurance). The policy is actually underwritten and insured through MetLife, and although the policy is a really good deal when you're younger, the pricing gets much more costly once you get about 50 or so, especially depending on how long you need coverage. You would think that the Federal Government would provide the best rates, but this just isn't the case - You could actually get a lower term policy directly through MetLife, who has since rebranded their name to Brighthouse Financial. In addition, many Federal Employees do not even know that they're paying too much, as the premiums are usually automatically taken straight out of their paycheck, which is a bummer.

I have included rates below for FEGLI's Option B - Additional Coverage, and this was taken directly from OPM's website (https://www.opm.gov/healthcare-insurance/life-insurance/program-information/#url=Premiums-for-Employees) SEE BELOW FOR MY FULL COMPARISON ANALYSIS BASED ON YOUR SITUATION - ALL RATES ARE ASSUMING $100,000 OF GROUP COVERAGE, AND THAT YOU COULD ALSO QUALIFY FOR THE BEST, PREFERRED PLUS NON-TOBACCO HEALTH CLASS FROM THE MOST COMPETITIVE CARRIER TODAY:

FEGLI Rates for Option B - Additional

Age Group Biweekly, per $1,000 Monthly, per $1,000
Under 35 $0.02 $0.043 - $4.30/mo
3539 $0.03 $0.065 - $6.50/mo
4044 $0.04 $0.087 - $8.70/mo
4549 $0.07 $0.152 - $15.20/mo
5054 $0.11 $0.238 - $23.80/mo
5559 $0.20 $0.433 - $43.30/mo
6064 $0.44 $0.953 - $95.30/mo
6569 $0.54 $1.170 - $117.00/mo
7074 $0.96 $2.080 - $208.00/mo
7579 $1.80 $3.900 - $390.00/mo
80 and over $2.64 $5.720 - $572.00/mo

Now, take your specific situation and ASSUMING you were an actual Federal Employee and offered the FEGLI group policy. Assuming a 40yr old male, Preferred Plus NT, looking for a $100k 15yr Level Term policy - The least expensive carrier on the market today is Protective Life and it is $9.20 per month.

FEGLI Group Policy: (Ages 40-44: $8.70/mo x 12mths x 5yrs = $522.00 total) + (Ages 45-49: $15.20/mo x 12mths x 5yrs = $912.00 total) + (Ages 50-54: $23.80/mo X 12mths X 5yrs = $1,428 total) = $2,862.00 in total premiums paid over 15yrs
Standalone 15yr Level Term through Protective Life: Ages 40-55: $9.20/mo x 12mths x 15yrs = $1,656.00 in total premiums paid over 15yrs, the policy is portable (you own it), and you saved $1,206.00 in total premiums!!

Of course, your group rate table pricing will most likely be different, but as you can see, the standalone 15yr Level Term through Protective Life would be a much better option here. It would also be a better option if you only went with a 10yr Level Term, assuming you could qualify for the top Preferred Plus NT rate as I've mentioned.

Lastly, I HIGHLY DOUBT that NWM's rates are lower than purchasing the policy through an independent broker. Also, you should be able to qualify for the top Preferred Plus NT health class with other carriers, as NWM's underwriting guidelines are typically rather "tight" and restrictive. Meaning, you'd qualify for a Preferred NT through them, but at the better/lower cost Preferred Plus NT with the other more liberal carriers on the market.

Below are the lowest rates for a 40yr old male (actual and age nearest 40), $500k 15 Year Level Term, Assuming both the best Preferred Plus NT health class, as well as the 2nd highest Preferred NT health class.. In both situations, Protective Life is the least expensive carrier - All rates were taken from www.Term4Sale.comand I'm listed as an independent agent/broker on that site, as I have previously mentioned:

PREFERRED PLUS NT - Protective Life: $20.37 per month, or $236.81 per year
PREFERRED NT - Protective Life: $28.91 per month, or $336.15 per year

What are they quoting you at NWM for a Preferred NT $500k 15 Year Level Term? I'd bet NWM's rates are more than what I've listed above.





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