With over 400,000 members, CPAs look to the AICPA for advocacy, community and benefits. Some of these benefits are clearly advantageous to members; other benefits are not necessarily “beneficial”.
In this article, you will learn about the life insurance plans offered to members of the AICPA. You’ll learn exactly what types of coverages are offered and whether or not they compare favorably to life insurance you can obtain elsewhere.
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You might have done some quick research on the AICPA site and got bogged down. Perhaps you need a term life policy and thought you would check out the discounted rates offered to members. Well, if you are a little confused, then you’re not alone. Determining eligibility, rates (including Refunds) and available riders takes some work.
As experienced life insurance agents, it took us a fair amount of time to sort through the options and rates. Hopefully, this review will save you the time of hassle of wading through the pages at the AICPA site. We will provide actual rate comparisons, so you can see precisely how the life insurance coverage through the AICPA compares to your other options. This AICPA life insurance review will help you make sense of all your coverage options.
Three Options for Life Insurance Coverage Through the AICPA
- Term Life Insurance and Spouse Life Insurance (AKA: CPA Term Life)
- Level Premium Term (LPT) Life Insurance.
- Group Variable Universal Life
This article will focus mainly on the two term products offered: CPA Term Life and Level Premium Term (LPT). Determining the amount of coverage and the rate class for which you are eligible is based on several factors.
- Face Amount of Coverage
- Membership in the AICPA, State Society of CPAs or other eligible organizations
- Health, Smoker or Non-smoker, Family history
We’ll first look at the CPA Term Life plan and see how the above factors dictate your ability to get coverage.
Term Life Insurance and Spouse Life Insurance (CPA Term Life)
The CPA Term Life is group life insurance offered through Prudential Life Insurance Company. The rates are age-banded, so they increase when you reach a new age bracket every five years. This term insurance is considered Increasing Term (as opposed to level term).
The rates are scheduled to increase every five years, but even those rates can increase above the predetermined premiums (or what the AICPA calls contributions).
Face Amounts Available for CPA Term Life
- Up to $500,000. Available to anyone who is a member of their State Society of CPAs or another “eligible organization”.
- $500,000, but under $2.5 million. Available only to members of the AICPA.
- $2.5 million is the top level face amount and is available to those who are members of the AICPA and a member of their State Society of CPAs or other eligible organization.
Rate Classes Available for CPA Term Life
- Standard – This is the only rate class available for people ages 18 – 45
- Select (rates are 30% to 52% lower than Standard rates). Only available for ages 45 to 79
- Preferred (rates are 55% to 65% lower than Standard rates). Only available for ages 50 to 79.
If you apply for a plan in your late 30s or early 40s (for example), then you can only qualify for the most expensive Standard rates. This may seem counter-intuitive since younger people tend to have fewer health problems. However, this is how their plans operate.
If you turn 45 while on a CPA Term Life policy with Standard rates, then you can apply and qualify for the Select rates. The same process applies with Preferred rates. If you turn 50, then you can qualify for the Select rates. To qualify for the better rates, you will go through a medical underwriting process. If declined, then you still keep the same rate class (either Standard or Select) for which you originally qualified.
Is the CPA Term Life Policy a Good Deal?
Even with the refunds (which we discuss later), this is not a good deal for people under 45. Unless you are have a serious health condition and wouldn’t normally qualify for Standard rates, then you should steer clear of this plan. We will show actual rates over the course of 10, 15 and 20 years for various rate classes and ages. You can compare these rates to other companies that offer guaranteed level term policies.
Not only will the rates increase substantially every 5 years, there is the possibility that you could be locked into the Standard rates if your health changes for the worse.
For people age 45 and older, the rates are a little better due to the fact that you can qualify for the lower-cost Select and Preferred rates. However, even those rates are still not competitively priced.
Typically, group life insurance plans (even with most employer-based plans) are not a good deal unless you can’t qualify for coverage due to serious, chronic health conditions. So, if that’s your situation, then the CPA Term Life plan might be worth considering.
Keep in mind, these rates are not guaranteed, so premiums could increase at any time.
Refunds Reduce Your Rates
Once you have determined your rate (based on age and health), then you have to figure out the refund for which you qualify. We break down the refunds in a separate article here. Cash refunds significantly reduce the rates for the CPA Term Life plans. The refunds typically range from 42% to 57%, depending on age. The refunds for the LPT plans are much lower (closer to 10% of the premium).
When you run a quote using the AICPA web site, the rates show the rates with and without the refunds. Even with the refunds, these rates are still very high compared to what you can get elsewhere.
Level Premium Term (LPT) Life Insurance
One of the main differences between the CPA Term Life and the Level Term Life is the type of policy. They are both term policies, but the CPA Term increases in premium every five years. The Level Term Life plan is offered as 10-year and 20-year level term policies.
- For those aged 56 to 65, only the 10-year level term plan is offered.
- There are no 15-year or 30-year level term plans offered.
If you are in good health and under the age of 50, then you will be better off applying for a Level Premium Term policy (LPT). With CPA Term, you can only qualify for Select and Preferred rates at the ages of 45 and 50, respectively. With the LPT plan, you have better options.
According to the AICPA site, “If you are under age 45 and approved for coverage, you will qualify for Preferred rates.” There are some pre-screening questions to qualify for the Preferred rates and you can immediately be disqualified for the Preferred rates (and subsequently only be eligible for the CPA Term Life plans) if you answer yes to the following question:
Has your mother or father died prior to age 60 as a result of heart disease, stroke or cancer (does not include stepparent(s) or adoptive parents)?
There are a few other pre-screening questions related to your driving record, history of drug/alcohol treatment, smoking history, and hazardous avocations. However, the vast majority of people will answer ‘no’ to those questions and receive the “initial” Preferred rate. You still have to undergo full medical underwriting to qualify for the Preferred rates.
Decent 10-year and 20-year Term Rates
The rates for the 10-year and 20-year level term policies are decent after factoring in the Refund. We compare the rates for a 35 year-old and 45 year-old here. As you will see, the rates are clearly much better if you obtain coverage with other carriers. Please check out our rate comparisons.
No Rate Guarantee
One important thing to note, that can be easily overlooked, is that the LPT (level premium term) plans are not guaranteed. For the most part, level term rates on the market are fully guaranteed for the term period. The LPT rates are “level”, meaning the rates are scheduled to stay the same. However, unlike almost all level term products, these group rates are not guaranteed. So, the rates could increase at anytime. Of course, you can’t be singled out for a rate increase, but “rates may change on a class basis” as described on the AICPA site.
In all fairness, it is highly unlikely Prudential will increase rates on their 10 and 20-year level term plans. They haven’t increased rates for 30 years (for existing policyholders). However, why take a chance? If this company experiences something similar to AIG, then why should you risk having your term rates increase? Why not opt for a guaranteed level term policy?
Doesn’t Prudential Have Very Good Rates?
Actually, Prudential has extremely competitive guaranteed level term rates. You will see them on our quote engine, usually ranking in the lowest 5 to 10 carriers for 10, 15, 20, and 30 year term plans. So, why are the rates through the AICPA higher? That’s a good question. Even with the best underwriting classifications and the best possible Refunds applied, the rates are still higher (and not guaranteed).
Group Variable Universal Life
The third life insurance plan offered through the AICPA is the Group Variable Universal Life (VUL). The Group VUL is a product that combines permanent life insurance with a cash value (investment) component. We will provide a review and more details on this policy in separate article.
AICPA Life Insurance Review – The Bottom Line
Hopefully, this article clearly spelled out the two options for term life insurance offered through the AICPA. With all the factors determining eligibility, face amount, and underwriting class, it can be a bit complicated. The bottom line is that you can do significantly better by purchasing a policy outside the AICPA.
We didn’t come to this conclusion until we ran numerous quotes based on various ages, face amounts and underwriting classes. We encourage you to check out the rate comparisons and see how the AICPA policies stack up. These group rates offered through Prudential, even with all the large refunds, simply don’t compare to your other options.
If you would like a free consultation or have questions about your options for life insurance, please call us, email us, or complete the information in our quoting tool.