Earlier this year I had the opportunity to attend an insurance conference put on by Low Load Insurance Services (LLIS). LLIS works exclusively with fee-only financial planners to develop insurance solutions for clients. They have tremendous expertise and experience across various insurance areas including life, disability, and long term care. After spending two days in Tampa, FL at their annual academy here are some interesting takeaways about term life insurance:
1. Female life insurance rates are about 15% cheaper than male life insurance rates, in general
2. Smoker rates are about 3 times greater than non-smoker rates; however once smokers quit, their underwriting class can steadily improve over several years
3. For group term policies such as those provided by employers, the first $50,000 of employee death benefit coverage is tax free but employees pay taxes on coverage amounts over $50,000
4. Most group term policies are priced in 5-year increments so when you turn 50 (or 55 or 60) you may see significant premium increases
5. For non-working spouses, most insurance companies will typically match the employed spouse’s coverage dollar for dollar up to $1M of coverage; and additional coverage may be possible with justification
6. It may make sense to take inflation into account when considering how much life insurance coverage to purchase. Although we cannot predict when a policy will pay out, a $1M policy that pays out in 20 years will have significantly less purchasing power compared to $1M today.
7. There’s a cool concept called term layering that for some people may be a better solution than applying for a single traditional term policy. Essentially, you apply for 2 or more policies with different terms and potentially different coverage amounts. So instead of a $3M thirty-year term policy, you could apply for three $1M policies – one for 30 years, one for 20 years, and one for 10 years. Some of the benefits of the term layering approach are that your coverage and respective premiums decrease as you get older when your insurance needs have typically decreased and your savings and investments have typically increased.