It makes sense to prepare for the unexpected, and life insurance offers a lot of preparation for a small amount of money.
That’s why life insurance remains one of the most common types of insurance coverage in the market and why so many companies offer it.
This could also explain why so many professional organizations and other non-insurance companies offer their members life insurance policies.
Take the American Institute of Certified Public Accountants (AICPA), which offers its more than 400,000 members around the world a few life insurance programs and some nice online tools to connect members with a policy.
The Prudential Co., a well-known insurer that also ranks well as a provider, writes the AICPA’s policies.
Yet we’ve been helping a growing number of CPAs secure cheaper life insurance coverage than they can find through the AICPA.
Finding the Best Life Insurance Coverage
If you’re in average to good health, you should be able to find better life insurance than the AICPA offers by shopping the open market and making your own coverage decisions.
We’ve been able to help CPAs who are 50 or older, especially, save a significant amount of money by opening up their options beyond the handful of programs the AICPA offers.
Before I get into my detailed review of the AICPA Life Insurance Plan, I want to point out the AICPA is a great association providing invaluable resources to its members.
I don’t mean to pick on the AICPA specifically. Any professional organization that directs its members to only a few insurance options will have this same weakness: a lack of variety that simply falls short of what you can find elsewhere.
Life insurance is a personal product and it should be customized to meet your specific needs. When you have only a few options to choose from, you’re automatically limited.
It would be like showing up for work and being told you can use only three numbers today instead of ten. You’d have to do a lot of rounding up and down.
By shopping in the full marketplace and bringing in some of the best life insurance companies in the nation, you’ll have infinitely more options for your coverage and a much higher likelihood of finding a precise fit for you and your family.
Why? Because not all leading life insurance companies underwrite policies the same way. If you have a particular challenge, such as diabetes for example, we can find a company that will be more likely to accept your policy without charging higher premiums.
Now, let’s get back to AICPA’s specifics.
Some Other Weaknesses in AICPA’s Deals
The AICPA does a great job selling its policies by highlighting features such as large coverage amounts and even cash refunds for policyholders.
Let’s take a closer look at these programs to see how they work:
AICPA’s CPA Life Insurance Plan
The association’s “Life Insurance Plan” policy is an increasing term life insurance policy issued by Prudential. Your rates will increase every five years, and the policy has a $2.5 million dollar coverage cap.
Almost anyone can qualify – AICPA claims 90 percent of those who apply for CPA Life are approved.
What could be better: By finding a term policy with level premiums you can lock in a lower premium based on your current age and health and pay that same low rate for up to 30 years.
Also, when you’re relatively healthy, your health can unlock lower rates rather than having your policy lumped in with the wider population. With a policy like this, you’re effectively paying higher premiums to subsidize the policies of less healthy applicants.
AICPA’s Life Insurance Cash Refund
This is the first thing many CPAs bring up during our conversations. Each year, in mid-February, the AICPA issues cash refunds for the money Prudential doesn’t use to pay claims or overhead. This refund percentage fluctuates depending on annual performance.
While this sounds like a great deal for accountants, you should know that all life insurance companies do this each year already.
However, instead of giving cash refunds to policyholders, most life insurance companies lower their life insurance rates to gain a bigger market share which helps preserve the overall health of the company and, by extension, your policy.
In other words, this AICPA life insurance plan is overcharging you for life insurance for a year then giving a refund (while keeping all the interest accrued). It’s a great deal — for Prudential.
AICPA’s Level Term Life Insurance
The AICPA now has a level term option. However, they offer only a 10- and 20-year term option. If you want a 15-, 25- or 30-year term, it’s not available through the AICPA.
Why does this matter? Your life insurance coverage should be timed with your anticipated stages of life. If you just took out a 30-year mortgage, for example, and you worry how your partner would pay off the home if you died, a 30-year term policy could allay your fears.
Sure, you could get a 20-year policy now and then add a 10-year policy later, but remember: Your current age and health could save you a significant amount of money if you can extend a policy beyond 20 years.
Twenty years from now, for example, you will be 20 years older, and you’ll probably be less healthy, I’m sad to say. So you’d probably pay a lot more for those last 10 years of coverage.
Even on a 20-year term policy, you can beat AICPA’s advertised rates by getting your own individualized life insurance quote.
Since group coverage like the AICPA’s policies takes all risks (healthy and unhealthy) and lumps them in together, it’s almost always going to be more expensive for the people in average to good health who could get a lower rate elsewhere.
Who Should Get an AICPA Policy?
Which brings us to the next question: Should any accountant go with an AICPA policy?
Yes, there are actually two good reasons to go this route:
If You Don’t Plan to Compare Rates
If you’re looking for life insurance coverage but you don’t expect you’ll do much shopping around and comparing rates, just stick with the AICPA’s offerings.
AICPA’s policies are typically costlier and less effective than the best policies out there, but you can find more expensive and less effective policies. Or more likely, a company offering a shakier policy will find you.
Some of these companies have low financial ratings which means they aren’t as likely to be around in 20 years at the end of your policy. With AICPA, at least you’re working with a reputable insurer with Prudential.
If You Can’t Get Better Coverage Because of Your Health
AICPA’s Prudential-based policies offer a perfect for applicants with health issues. If you have any major health issues, just go with a policy the association offers you.
I mentioned above the way these group policies distribute risk. While this means healthier people pay more, it also means people with health issues can pay less.
For the same reason, the AICPA Life Insurance Plan is also great for applicants who want the convenience of not taking the mini-physical required by traditional life insurance plans. The application process is quick and easy and you can do it online through their website.
When to Shop the Open Market Instead
You’ve probably already gathered the answer to this question, but I’ll re-state it just to be clear:
AICPA’s plans are more expensive than buying life insurance in the open market, so if you’re looking for the best coverage at the best price, shop around.
Every scenario we’ve run for clients age 45 and older shows a cost benefit to finding your own coverage on the open market. Savings tend to be most noticeable for healthy applicants in their 50s.
Bottom Life: You Could Do Better
We’ve established you can do better than the CPA Life Insurance Plan if you’re in average to good health. Before signing off, I’d also like to point out the uncertainty in these plans.
When you agree to a policy that increases in premiums every five years and bases its savings on a refund percentage that fluctuates from year to year, it can be hard to plan for the future.
A level term life insurance policy locks in your rate and guarantees your coverage and your premiums will not change until the term expires.
If you have an AICPA life insurance plan or are considering purchasing one, please give us a call so we can run a free analysis for you.
We’ll factor in your health situation and provide you with a free analysis comparing the AICPA Life Insurance Plan and traditional life insurance so you can make an informed decision.