Life Insurance Options


A

Augustine

It seems to me that whenever a company offers its employees life-
insurance policies, the price is really hard to beat. Is this
assesment correct? Would there be drawbacks to this that perhaps
would make having a backup life insurance of a smaller value
advisable? if so, it seems that term-life is preferable, but how
long? What about return-of-premium products, is their extra cost
worth it?

TIA
 
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J

John A. Weeks III

Augustine said:
It seems to me that whenever a company offers its employees life-
insurance policies, the price is really hard to beat. Is this
assesment correct? Would there be drawbacks to this that perhaps
would make having a backup life insurance of a smaller value
advisable? if so, it seems that term-life is preferable, but how
long? What about return-of-premium products, is their extra cost
worth it?
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-
 
W

Will Trice

Augustine said:
It seems to me that whenever a company offers its employees life-
insurance policies, the price is really hard to beat. Is this
assesment correct?
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...
Would there be drawbacks to this that perhaps
would make having a backup life insurance of a smaller value
advisable?
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
 
C

Cal

It seems to me that whenever a company offers its employees life-
insurance policies, the price is really hard to beat. Is this
assesment correct?
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
would make having a backup life insurance of a smaller value
advisable?
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
worth it?
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
 
K

kastnna

It seems to me that whenever a company offers its employees life-
insurance policies, the price is really hard to beat.  Is this
assesment correct?  Would there be drawbacks to this that perhaps
would make having a backup life insurance of a smaller value
advisable?
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.
 
D

Douglas Johnson

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........
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
 
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C

Cal

Douglas Johnson said:
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
 
A

Augustine

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...
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.
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.
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.
 
A

Augustine

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.
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.
 
A

Augustine

Group life also imposes additional consequences when leaving your
employer.
That's what motivated me to think seriously about getting extra
insurance...

Thanks.
 
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D

Douglas Johnson

Cal said:
"Douglas Johnson" <[email protected]> wrote in message
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?????????????
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
 
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C

Cal

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

Thanks.
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
 

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