We’ve been helping a growing number of CPA’s secure cheaper life insurance coverage than what the AICPA offers. This article was written to show other CPA’s the differences in benefits.
If you’re in average to good health and can qualify for Standard, Standard Plus, Preferred or Preferred Plus health classifications, an individual term life insurance policy will be less expensive than what the AICP offers. Especially if you’re over the age of 50 (that’s when we really start seeing significant savings).
Before I get into my detailed review of the AICPA Life Insurance Plan, let me preface it by saying the AICPA is a great association. However, my experience has shown that you can do better than their life insurance offerings through some of the best life insurance companies in the US.
Now, lets get on to that Review of AICPA:
What is the AICPA “CPA Life Insurance Plan”?
It’s an increasing term life insurance policy issued by Prudential. Your rates will increase every 5 years and it has a $2.5 million dollar coverage cap. Almost anyone can qualify – AICPA claims 90% of those who apply for CPA Life are approved.
Understanding AICPA Life Insurance Cash Refund
This is the first thing many CPA’s bring up during our conversations. Each year in mid February, the AICPA gives back cash refunds for the money Prudential doesn’t use for claims or overhead. This number fluctuates depending on performance.
While this sounds like a great deal, this is what all life insurance companies do already. However, instead of giving cash refunds, most life insurance companies lower their life insurance rates to gain a bigger market share.
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 Life Insurance Rates Compared To An Individual Life Insurance Policy
Example: Male 55 years old, $500,000 for 15 years
Here are the rates based on AICPA’s 2012/2013 rate guide. Total cost is over 15 years to age 70, factoring in the refund.
Here are individual life insurance rates on the open market if you were to purchase a 15 year level term life insurance policy at age 55.
When you look at total cost over the 15 years, it makes sense to go with an individual term life insurance policy outside of AICPA. Even if you’re in average health (Standard health class), you can do better than what AICPA offers.
Every comparison scenario we run for AICPA members who need coverage for 10 years or longer (and can qualify for Standard or better health classification) has been in favor of buying an individual life insurance policy.
The above scenario is an actual analysis I did for a client of mine who received Preferred rates and saved $13,980 over the course of 15 years. On top of that, he won’t be “loaning” Prudential the extra money every year.
Also important to note is the refund isn’t guaranteed and fluctuates. Just because it’s 33% this year, doesn’t mean it will be that high next year.
What about the AICPA Level Term Life Insurance Option
The AICPA has recently come out with a level term option. However, they only allow a 10 and 20 year term option. So if you want a 15, 25 or 30 year term, it’s not available through the AICPA.
The rates on their level term life insurance are still considerably more expensive than what’s available in the open market. You can compare for yourself:
Since group coverage takes all risks (healthy and unhealthy), it’s almost always going to be more expensive for the people in average to good health.’
Advantages to AICPA Life Insurance
There is one major advantage with the AICPA Life Insurance Plan.
It’s perfect for those with health issues. If you have any major health issues, we’ll immediately tell you to take advantage of the AICPA offering since there are limited health questions and almost anyone can qualify.
The AICPA Life Insurance Plan is also great for those 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.
Disadvantages to AICPA Life Insurance
It’s more expensive than buying life insurance in the open market. Every scenario we’ve run for ages 45 and up has come in favor of going the traditional life insurance route IF price is your main concern. It’s dramatically less expensive once you hit your 50’s.
It has a $2.5 million dollar coverage cap. Many CPA’s need more than $2.5 million of coverage and need to get a traditional life insurance policy to supplement it.
Our Overall AICPA Life Insurance Review
We’ve established you can do much better than the CPA Life Insurance Plan if you’re in average to good health. Also, there’s just too many unknowns in this plan. Increasing premiums every 5 years, a fluctuating refund % rate every year and the risk of Prudential increasing rates for all ages is a lot of uncertainty.
With a level term life insurance policy, everything is locked in and guaranteed. No fluctuating premiums, no guessing and you’ll save a lot of money.
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 (just like the one in the above scenario). We’ll factor in your health situation and provide you with a free analysis comparing the AICPA Life Insurane Plan and traditional life insurance so you can make an informed decision.