Is AICPA Life Insurance Worth It?
Like many other member associations, the American Institute of Certified Public Accountants (AICPA) allows its members the opportunity for group rates on various life insurance products. It might be tempting to go the group rate route for most people since it is usually easier to apply and requires less underwriting than traditional fully underwritten policies, but most group policies have drawbacks such as increasing premiums and limits on coverage. In fact, if you are willing to take the time to apply for a fully underwritten policy, you could save thousands over the life of your policy. Here is a look at how the AICPA’s term life insurance plans stack up against fully underwritten individual policies.
AICPA’s Term Life Insurance Options – The AICPA offers two term life insurance plans that are issued by Prudential. The first plan is the CPA Life Plan which offers up to $2.5 million in coverage (depending on your age and membership in various qualifying CPA programs) for applicants up to age 74. The premiums increase in 5 year bands and coverage is available until age 80. Most applicants age 50 or older will qualify for the product’s “select” health rating. This policy offers cash refunds on a portion of annual premiums that are not used for claims and expenses.
The second term plan that the AICPA offers is a Level Premium Term (LPT) life insurance plan. This plan is also capped at $2.5 million in coverage and allows 10 and 20 year level term plans with rates increasing to age 95 after the level premium period has ended. You are able to qualify for a “preferred” health rating if you are willing to go through a full underwriting. You can apply up to age 65 and the LPT policy is also eligible for the annual cash refund on premiums paid.
CPA Life Plan Rates Versus Individual Policy Rates – Since there is limited underwriting in a group plan, you will pay more over the long haul for the AICPA plan compared to a fully underwritten individual plan in almost every case. In this example, we will use 50 year old male and female applicants that are rated “select” in the CPA Life Plan and intend to keep $1,000,000 of coverage for 20 years. Refund percentages are based on the latest data. Premium rates are as of 2/19/2015).
Male “Select” Rates with AICPA Coverage
| Age Band | AICPA Annual Rate | Refund % | Net Premium |
|---|---|---|---|
| 50-54 | $1,800 | 40% | $5,400.00 |
| 55-59 | $3,360 | 40% | $10,080.00 |
| 60-64 | $6,480 | 30% | $22,680.00 |
| 65-69 | $11,640 | 30% | $40,740.00 |
| Total Net Premiums Paid | $78,900.00 |
Male Rates with Individual Coverage
| Health Rating | Annual Premium | Total 20 Year Premiums |
|---|---|---|
| Preferred plus | $1,969.00 | $39,380.00 |
| Preferred | $2,074.88 | $41,497.60 |
| Standard Plus | $2,812.15 | $56,243.00 |
| Standard | $3,234.00 | $64,680.00 |
Female “Select” Rates with AICPA Coverage
| Age Band | AICPA Annual Rate | Refund % | Net Premium |
|---|---|---|---|
| 50-54 | $7,200.00 | 40% | $4,320.00 |
| 55-59 | $13,800.00 | 40% | $8,280.00 |
| 60-64 | $26,400.00 | 30% | $18,480.00 |
| 64-69 | $49,200.00 | 30% | $34,440.00 |
| Total Net Premiums Paid | $65,520.00 |
Female Rates with Individual Coverage
| Health Rating | Annual Premium | Total 20 Year Premiums |
|---|---|---|
| Preferred plus | $1,246.00 | $24,920.00 |
| Preferred | $1,508.50 | $30,170.00 |
| Standard Plus | $2,000.00 | $40,000.00 |
| Standard | $2,493.64 | $49,872.80 |
As you can see, even with the cash refund credits from AICPA’s policy, owning an individual policy will save you quite a bit over the long haul even if you are given a “standard” health rating on your individual policy. If you are in excellent health and rated “preferred” or better, an individual policy will add up to even greater savings.
Level Premium Term (LPT) Plan Versus Individual Level Term Coverage – If you are looking at AICPA’s LPT product, you will most likely be able to get a better rate with an individual policy. Using the same client above, AICPA’s LPT coverage was still more expensive compared to an individual policy. Here is the breakdown:
Male Rates Using AICPA Level Premium Term (LPT) Plan
| AICPA Health Rating | Annual Premium | Refund % | Annual Net Premium |
|---|---|---|---|
| Preferred | $2,616.00 | 12% | $2,302.08 |
| Select | $4,104.00 | 12% | $3,611.52 |
| Standard | $9,840.00 | 12% | $8,659.20 |
Male Rates with Individual Coverage
| Health Rating | Annual Premium |
|---|---|
| Preferred Plus | $1,969.00 |
| Preferred | $2,074.88 |
| Standard Plus | $2,812.15 |
| Standard | $3,234.00 |
Female Rates Using AICPA Level Premium Term (LPT) Plan
| AICPA Health Rating | Annual Premium | Refund % | Net Annual Premium |
|---|---|---|---|
| Preferred | $2,064.00 | 12% | $1,816.32 |
| Select | $3,168.00 | 12% | $2,787.84 |
| Standard | $7,608.00 | 12% | $6,695.04 |
Female Rates with Individual Coverage
| Health Rating | Annual Premium |
|---|---|
| Preferred Plus | $1,246.00 |
| Preferred | $1,508.50 |
| Standard Plus | $2,000.00 |
| Standard | $2,493.64 |
As you can see, an individual level premium term policy will still be less expensive than AICPA’s LPT product. You must qualify for a “preferred” rating for AICPA’s product as you would with a fully underwritten individual policy.
How Does AICPA’s Life Insurance Cash Refund Work? – As mentioned previously, the CPA Life Plan and the Level Premium Term Plan both offer annual cash refunds. It should be noted that although a refund has been paid every year since the AICPA has offered life insurance; refunds are not guaranteed and refund percentages can fluctuate yearly depending on the impact of claims and expenses on the insurance company. Essentially, the insurance company is overcharging you for coverage to give itself a cushion in the event it has a higher claims rate or it incurs higher expenses for the year. So although the refund does sound like a good feature, it does have its drawbacks.
Benefits to Owning AICPA Life Insurance – Although coverage through AICPA can be pricier than buying an individual policy, it is ideal for those who have health issues. Since there are a limited number of health questions on the application, most people can get approved for coverage at the “select” rate after age 50 as long as they don’t have any major health issues. It is also ideal for those who do not mind paying higher rates for the convenience of not having to take the paramedical exam required for a fully underwritten policy. One more benefit is that the insurance is issued by Prudential which is a much respected name in the industry.
Disadvantages to Owning AICPA Life Insurance – There are several disadvantages to owning AICPA life insurance.
- Like most other group and association plans, the cost of group coverage is usually higher compared to buying an individual policy. This is especially true with the CPA Life product which also has increasing premiums every 5 years.
- You must also be a member of AICPA or another CPA association in order to have access to these life insurance products. If you ever cancel your membership, you will most likely not be able to renew your coverage.
- There is a$2.5 million cap on coverage and the CPA Life product will automatically lower the cap at older ages.
- Rates for the CPA Life product are not guaranteed and can increase in the future.
- The LPT Plan only allows 10 and 20 year coverage periods. Most companies that offer fully underwritten coverage offer 10, 15, 20, 25 and 30 year coverage options as well
- The cash refund is not guaranteed. The AICPA has an excellent track record of paying out an annual refund, but the percentage returned will depend on the claims and expense rate incurred by the insurance company.
Final Thoughts About AICPA Life Insurance – This post was in no way meant to say anything negative about the AICPA as an organization. The AICPA is a well respected organization that provides a wealth of important resources and benefits, including life insurance, to its members. We are simply trying to encourage people to shop for the best life insurance rates possible for their particular situation. Shopping your coverage could save you thousands over the life of your policy. If you own an AICPA policy, we can provide a complimentary, no obligation analysis for you. There is a good chance you will save money over the long haul by purchasing an individual policy no matter what age you are.
About Us
Archstone Insurance Services, LLC is an independent agency that shops over 40 of the top life insurance carriers to provide huge savings on life insurance coverage for our clients. We are happy to answer any questions you might have about any of the insurance products we offer, your planning needs or your existing coverage. Feel free to call us directly at (888) 687-9444 or email us at info@archstoneagency.com. You can also visit our website at www.archstoneinsurance.com.
