Life Insurance Options

Another name for "return-of-premium" is "rape the client" or "buy a new boat" policy. You want to stay clear of that kind of rip-off product. If you need any insurance at all, it is basic term life, and you have only as long as (1) someone is depending on your income, and (2) you don't have enough savings to replace that income.

-john-

In the companies I have worked for, supplemental insurance offered by the company was/is significantly more expensive than quotes I've received on the internet. However, when discussing various benefits here, I have discovered that my industry does not necessarily fit the norm...

One drawback is that your supplemental life from your company may not be portable. Thus, if you are laid off or you quit, you may not have coverage.

-Will

william dot trice at ngc dot com

Basically YES. The company usually offers a G R O U P contract, which spreads the costs over a large number of policies. This results in lower cost per individual, per thousand.

Would there be drawbacks to this that perhaps

Generally speaking the answer is an UNQULIFIED "YES." Most "group policies" are issued to the GROUP, and can be changed or terminated by the GROUP.

if so, it seems that term-life is preferable, but how long?

An INDIVIDUAL Term Life Policy, is as the name states in force for a TERM PERIOD ie; 5, 10, 15, 20, 30 years. HOWEVER keep in mind that the premium that is paid for a Term Policy is USED by the policy, meaning that there is NO VALUE to the contract IF you FAIL to DIE during that TERM Period. It is very similar to an AUTO policy, that you pay for every year, and NEVER have an accident. The company says THANK YOU each time that you pay them. That is all........

What about return-of-premium products, is their extra cost

In my estimation, in over 40 years in the business, the cost of R/O/P contract out weighs the value. Generaly speaking, if you used the EXTRA cost to BUY EXTRA Life Insurance, two things can happen.

a) if you die, more death benefit. b) if you live a long time, more Cash value Benefits.

Cal Lester CLU

It's usually not an apples-to-apples comparison. The vast majority of group life insurance is called annually renewable term (ART). On the contrary most individually sold life insurance policies are guaranteed term (usually for 5,10,15,20, or 30 years). An ART policy starts very cheaply and increases in price every year. A guaranteed term policy remains the same price throughout the entire term period. ART will often save money up front, but end up costing more in the end when compared to a guaranteed term product over the same period.

One of the "blessings" of group coverage is also its curse. Usually little or no medical exams are needed (yeah!). Because of this, the insurer issues everyone at standard health ratings (boo!). This is the equivalent of taxing the healthy to subsidize the unhealthy.

Group life also imposes additional consequences when leaving your employer. Once unemployed your typical options are to 1) convert to permanent insurance, or 2) lose your coverage. The conversion is done at standard rates, which may be higher or lower than you deserve, and you may not need permanent insurance anyway. In addition the conversion is done with the insurer that provided your ART. My experience has been that the best group life providers are not the best individual permanent insurers (market niche/specialization). Losing your coverage has the potential drawback of being uninsured. If you still need the coverage, you must then rely on your next employer or go through underwriting (including medical exams) on your own. If you have aged significantly or had serious health complications the later issue could really sting.

Is that a bad thing? Avoiding auto accidents and living a long time seem like good things to me.

Insurance is like seatbelts and fire extinguishers. You want to own them, but you don't want to use them.

-- Doug

Not necessarily true. With PERMANENT Life Insurance, you can have BOTH. The coverage that you want, for as long as YOU want it, and then, the possibility of an income for life. Other options include the ability to MISS paying premiums for some period of time (APL), PAID -UP Life insurance at some point in time, or EXTENDED Paid-UP Life for a specific period of time.

As to your first answer above, let me ask you:

Would you be willing to pat 10% MORE in Auto premium if there was a GUARANTEE that if you continue to avoid those accidents, I will give you ALL of your premiums back?????????????

Cal Lester CLU

I see. But what do you mean by b)?

Thanks.

I actually ran the numbers and the deal doesn't seem to be better at all. My previous employer offered a much better deal. The current one costs about as much as if I had shopped around, if not a tad more.

That's my goal with a supplemental insurance to cover me between jobs. I could even hedge the cost by purchasing a smaller value if the company offered a good deal, but it doesn't. Which makes me realize that having another insurance would also guarantee that I have a good policy, no matter what my current employer offers.

Thanks.

Indeed. A quick perusal of the Internet resulted in such policies being about 2x more expensive than the regular type. IOW, I'm better off investing the difference.

Thanks.

That's what motivated me to think seriously about getting extra insurance...

Thanks.

Gee, I don't know. When? Next week, maybe. 40 years from now, probably not. I'd have to do an IRR and compare it with likely investment returns on that 10%. Then I'd have to discount that by the chances of having a wreck in that period.

Since I know the insurance company is not a charitable institution, I'd have to try and figure out why I'm different from the average person used by the company's actuaries to price that offer. Am I a better driver or a bigger sucker?

And that's the problem with too many of the insurance products, other than the straightforward "I pay you premiums and if something bad happens, you pay me." They are so complicated, you don't know if you getting a good deal or not. You do know that the company understands it better than you do.

Remember the old rule of poker: "If you don't know who the patsy is, it's you."

-- Doug

B) refers to the inherent value of Permanent Life. You pay a HIGHER premium, a portion of which is placed into the Cash Value Account. Then depending on the type of contract that you have, that EXTRA portion earns either TAX DEFERRED (most time Tax Free) Interest, Income Tax Free Annual Dividends.

Cal Lester CLU