We will review the life insurance benefits that are offered to attorneys through the American Bar Endowment (ABE). The benefits are only available for lawyers who are members of the American Bar Association.
The ABE has an affiliation with an excellent life insurance carrier – New York Life Insurance Company. In fact, the ABE is celebrating 60 years with New York Life Insurance Co.
The American Bar Endowment is primarily funded by the dividends donated by policyholders.
Attorneys who purchase insurance policies are strongly encouraged to support the work of ABE by donating all (or a percentage) of the dividends received. Of course, dividends are not guaranteed, but a mutual company like New York Life has a strong history of paying dividends.
New York Life Insurance is the only life insurance carrier the ABE recommends for term life insurance and disability insurance. Since there is only one carrier to consider, it is easy for attorneys to get quotes on the ABE site for term life insurance and other types of coverage.
While the simplicity and convenience of working with one carrier can be nice, we recommend obtaining instant comparison quotes with multiple carriers by clicking here. Our quote engine compares over 50 carriers offering term life insurance.
As an example, a 42 year-old (nearest birthday) male, nonsmoker in excellent health can get a $750,000 20-year term life insurance for $215.63 per quarter or approximately $860 per year with New York Life. However, there are many top-notch, A+ rated life insurance companies that offer the same policy for less than $170 per quarter or approximately $680 per year. The savings can be substantial by shopping. In this case, the premium savings would be $180 per year or $2160 over the course of 20 years, not taking into account the investment opportunity cost with the premium savings.
You could actually find a life insurance policy that costs less or pays higher dividends and still donate money to the ABE or directly to the American Bar Association…or wherever you choose. There are several excellent mutual companies (companies owned by policyholders) available that also pay dividends.
Different types of life insurance offered through the ABE
The ABE offers attorneys several different types of insurance, but let’s take a look at their main product offering:
Guaranteed Level Term Life Insurance.
The ABE offers term life insurance with two different term periods (or term lengths) from which to choose: 10-year level term and 20-year level term. Basically, the life insurance company guarantees level premiums for the length of the term period. New York Life Insurance does not offer a 15-year, 25-year or 30-year level term product.
Oftentimes, a 30-year term policy can make the most sense, especially for a younger attorney in his or her 20s, 30s, or 40s. The purpose of a longer term period can vary, but the primary reason is to have a policy that will stay in force until children are no longer dependent on your income.
For example, a 32-year old might not be comfortable knowing that his or her policy will expire at age 52 with a 20-year term. Going from $1.5 million in coverage (as an example) to zero might not be a good strategy.
A 30-year term affords a 32-year old policyholder (at policy inception) added flexibility. 20 years later, at age 52, it could make sense to reduce the face amount to $750,000 (with a commensurate premium reduction) for the remaining 10-years of the policy.
Sometimes, a 15-year term policy is just the right amount of time to keep a policy. For example, a 45 year-old might realize that the term policy they purchased in their early 30s isn’t enough to meet their needs due to life changes.
An attorney might decide to start a solo practice or have another child later in life. There
are numerous situations where it would be nice to have other options (aside from just 10-year and 20-year term policies).
Again, every situation is different and that’s why it’s important to have several options from which to choose.
5-Year Banded Term Life
ABE offers 5-year banded term life insurance to meet the needs of younger attorneys. What makes this policy unique is that the premium starts off low and then increases every five years (or when the next age band is reached). This type of banded term life insurance policy also allows policyholders to increase the face amount by 10% each year with no medical underwriting.
Is this a good deal, even for younger attorneys? Taking our 42 year-old male again, the premium to start a banded policy is $330 per year. However, the premium at age 45 years-old is $1770 per year. At age 50, the premium increases to $3000 per year!
Age banded policies are usually not the best option. The long-term cost is significantly higher than purchasing a level term policy for 10 to 30 years. For an attorney just starting, with a very tight budget, purchasing an age-banded policy for just a year or two can be affordable and better than going without any life insurance coverage.
50+ Multi-Benefit Term Life
The American Bar Endowment offers this “simplified issue” policy to attorneys age 50 and older. Simplified issue means there only 5 or so health questions and no exam required. This type of plan can work well for someone with a chronic or serious health condition. Simplified issue life insurance can also be a good option for someone who hasn’t been to the doctor recently and would rather get a policy without an exam and/or doctor visit. The premiums are higher than policies that require an exam.
New York Life Insurance underwrites the policy and it will last to age 90. The face amounts offered range from $25,000 to $100,000.
There are many carriers that offer very competitively priced simplified issue policies. Most of these policies allow the insured to determine when the policy terminates, just like other term policies. Age 90 is a little young for a policy to terminate, especially if the policy is purchased for “final expense” needs. Typically, simplified issue policies will go to age 95, 100, or 110. The risk of outliving the term policy past age 90 is fairly high.
Attorneys and Accidental Death and Dismemberment Policies.
ABE offers Accidental Death and Dismemberment (AD&D) policies. As the name implies, the policy only pays a death benefit due to accidental death. It’s important to read the list of exclusions and understand how the policy defines “dismemberment”. To be eligible for full benefits, there must be a loss of two hands or two feet. Most AD&D life insurance policies are relatively low cost because the risk of dying due to an accident is very low. Similarly, the odds of a dismemberment are extremely low.
Even though the legal profession is a very low risk one, accidents can happen to anyone. According to the CDC’s WONDER database, in 2014 (the most recent data available) approximately 5% of the deaths in the U.S. were caused by accidents.
An AD&D life insurance policy is a low-cost option for coverage, but should not replace standard life insurance, which pays in the event of death due to accidents or illness.
Disability Insurance offered through the ABE
The ABE also offer disability insurance through New York Life. Unlike life insurance, there are a limited number of carriers that offer disability insurance. Also, the contract language used by carriers to define a disability and other key policy provisions can vary significantly. It is important to receive side-by-side comparison quotes, so a knowledgeable agent can explain the differences among policies.
We work with the best disability insurance carriers for attorneys, including Mass Mutual, Guardian, The Standard, Ohio National, and several more.
We are glad to provide quotes and advice for life and disability insurance.