Replacing life insurance is a process we take seriously. Unless it is clearly advantageous for you to replace your policy, we advise against it. Sometimes, it’s not as simple as comparing two identical term policies and involves a detailed analysis. In this article, we look at all the important considerations and answer the question, “Should I replace my AICPA life insurance coverage?”
We have written several articles examining the life insurance offered through the AICPA. For a general review, please click here.
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Replacing Level Term with Level Term
Occasionally, we find out someone purchased a life insurance policy through their auto insurance company simple because it was convenient. Perhaps their agent was someone they trust, so they felt good about their decision….until the discovered they could buy the same policy for much less elsewhere. They didn’t take the time to shop and realize much lower rates were available with A+ rated carriers.
In situations like this, it is a fairly straight forward process. However, certain factors are important to consider:
- How many years have you had your policy? If you are replacing a 20-year term that you purchased 2 years ago, then even if the premium is identical, it could make sense to replace it. For example, a 42 year-old might prefer to keep a policy in-force until age 62, rather than age 60.
- Your health. If your health has improved or worsened, this could affect the underwriting class.
- Rates. If you will save a few dollars per month, it might be worth the hassle. However, if you can save a couple hundred dollars each year (or more), it would be well worth your time.
You might have receive an unfavorable underwriting decision. It’s possible you were hoping for a Preferred rate, but you received a Standard or Standard Plus rate – at a significantly higher cost. Your agent said there was no recourse and you just couldn’t do better.
Replacing CPA Increasing Term
Our most common replacement with an AICPA policy involves their CPA increasing term policies. Since the rates increase in 5-year increments, it can seem like a good deal at first, but the rate increases can really add up.
If you plan to keep your policy beyond ten years, in most cases, it makes sense to consider a replacement. We look at sample rates in our article here. Of course, every situation is different, so we recommend a detailed comparison.
Another important consideration, on which elaborate in other articles, is the fact that the AICPA term rates are not guaranteed. The annual refunds are not guaranteed either. So, if you’re considering a 15, 20, or 30-year term, this becomes increasingly important. All the products we offer have guaranteed level premiums.
Prudential, the insurance company that underwrites AICPA policies, is a strong, stable carrier. So, it’s not likely they will increase rates. However, it is a risk many of our clients would rather avoid.
Replacing AICPA Level Term
In addition to the increasing term products, the AICPA also offers 10-year and 20-year level term products. These policies are “level” and are not scheduled to increase every 5 years. However, Prudential does not guarantee the rates will stay level.
Occasionally, we will replace an AICPA level term product. This usually boils down to a simple side-by-side comparison. You may be in excellent health and received the Preferred rate classification with your AICPA policy. They don’t offer a Preferred Best policy, unlike most individual carriers. The best you can do with AICPA level term is Preferred. So, one reason to consider a replacement is due your excellent (or improved) health.
Each carrier has unique underwriting guidelines. While, one carrier might offer you their Standard non-tobacco rate, another carrier might offer you their Preferred rate. That’s why we ask you a lot of questions. As you might have seen by using our quote engine, the difference between Standard and Preferred is significant.
It’s not uncommon for people to settle for a less-than-favorable underwriting decision. They are told, “This is the best you can do.” However, it’s possible that the agent is so busy (or inexperienced) to appeal the decision and fight for a better class. If you think this might have happened when you applied, let us see if we can do better. A replacement could make a lot of sense.
Other Reasons to Consider A Replacement
Sometimes, it can make sense to shop for replacement coverage if you received a Standard (or rated-up) policy at the age of 49, 59, or 69. It would seem to be against common sense, but sometimes you can get lower rate when you are a year older. The reason why is that carriers often have relaxed underwriting requirements at age 50, 60, and 70. For example, the guidelines used for hypertension and weight change based on age.
A 59 year-old might only qualify for a Standard rate due to hypertension or high cholesterol, or height/weight (for example). However, the thresholds are more favorable when you for applicants age 60 and over.
It Doesn’t Hurt to Check
Usually, within five minutes, we can tell whether or not it’s worth considering a replacement. There are situations where we need additional health information, so it’s not always quick. However, we need health information. We do the hard work of checking with our underwriters and finding you the best offer possible.
Even if you save $15 per month, on a 20-year term, that adds up to $3600 over the course of 20 years. That’s a significant amount of money that could go towards an investment.
Sometimes, we find out you can’t do better, but at least you tried and know there are no better, lower-cost options available.
Should I Replace My AICPA Life Insurance? Conclusion
We will be glad to prepare comparison quotes and help you make the right decision. Sometimes, we find out people are over insured, under insured or don’t have the right type of policy. Getting a second opinion is fairly quick and painless.
Please call our office or send us an email and we’ll be glad to help.