Author Topic: Term Life and AD&D through employer  (Read 3083 times)

jeromedawg

  • Magnum Stache
  • ******
  • Posts: 3268
  • Location: Orange County, CA
Term Life and AD&D through employer
« on: January 07, 2016, 10:52:32 AM »
Hey guys,

So I'm pretty set on buying term life outside of what my employee offers for basic coverage & STD. I'm assuming I should do the same for AD&D if necessary? And add it as a rider on whatever plan I go with for term life?

Is AD&D something that you guys would even recommend? I'm 35 now (wife is 29) and we have a 4mo old. I just started with a new employer and it's a telecommute position so don't anticipate driving around very much. Additionally, our plan is to have my wife quit her current job and go SAHM come February. So we'll both be at home pretty much full-time.

AlwaysLearningToSave

  • Bristles
  • ***
  • Posts: 437
Re: Term Life and AD&D through employer
« Reply #1 on: January 07, 2016, 11:05:42 AM »
I tend to be skeptical of Accidental Death and Dismemberment riders.  Make sure you have enough life insurance coverage that your family will be fine if you die, regardless of the cause.  Beyond that, AD&D strikes me as a gamble.  The manner of your death should have no significant bearing on your family's financial needs after you pass away. 

An AD&D rider invites your insurer to balk at paying the AD&D benefit if there is any question as to whether your death is "accidental" as that term is (purposefully) vaguely defined in the policy.  If you are counting on the AD&D payment for your family to make them financially secure and you die other than accidentally, you are hanging your family out to dry.

I recently purchased term life insurance policies.  I bought a low-dollar 30-year level term policy and added 20 year and 10 year riders on the assumption that our need for insurance is greatest now and will diminish over time.  I did not get AD&D riders.

If you have not already considered it, make sure you have adequate long term disability insurance.  You will be a greater financial burden to your family if you are alive but disabled and unable to work than if you just kick the bucket outright. 




jeromedawg

  • Magnum Stache
  • ******
  • Posts: 3268
  • Location: Orange County, CA
Re: Term Life and AD&D through employer
« Reply #2 on: January 07, 2016, 11:22:39 AM »
I tend to be skeptical of Accidental Death and Dismemberment riders.  Make sure you have enough life insurance coverage that your family will be fine if you die, regardless of the cause.  Beyond that, AD&D strikes me as a gamble.  The manner of your death should have no significant bearing on your family's financial needs after you pass away. 

An AD&D rider invites your insurer to balk at paying the AD&D benefit if there is any question as to whether your death is "accidental" as that term is (purposefully) vaguely defined in the policy.  If you are counting on the AD&D payment for your family to make them financially secure and you die other than accidentally, you are hanging your family out to dry.

I recently purchased term life insurance policies.  I bought a low-dollar 30-year level term policy and added 20 year and 10 year riders on the assumption that our need for insurance is greatest now and will diminish over time.  I did not get AD&D riders.

If you have not already considered it, make sure you have adequate long term disability insurance.  You will be a greater financial burden to your family if you are alive but disabled and unable to work than if you just kick the bucket outright.

Thanks for the tip - what are those 20 year and 10 year riders you refer to that you added to your base 30yr?

Also, are there any good sites to go through for comparing quotes? I just Googled and was going through Geico and they redirected to "lifequotes.com"

I'll have to look into long term disability too - I'm assuming that we'd be better off purchasing that independent of whatever my employer offers?

Caveat: my employer happens to be a large financial institution that offers these types of services but I assume that, as with any employer, if I quit or am terminated, the plan goes out the window regardless... 

AlwaysLearningToSave

  • Bristles
  • ***
  • Posts: 437
Re: Term Life and AD&D through employer
« Reply #3 on: January 07, 2016, 11:45:45 AM »
what are those 20 year and 10 year riders you refer to that you added to your base 30yr?

They are just additional term life insurance.  Rather than having three different term life insurance policies, State Farm structured it as a base policy with riders.  It probably reduces their administrative burden.

I'll have to look into long term disability too - I'm assuming that we'd be better off purchasing that independent of whatever my employer offers?

Caveat: my employer happens to be a large financial institution that offers these types of services but I assume that, as with any employer, if I quit or am terminated, the plan goes out the window regardless...

Not necessarily.  Just consider what your employer offers and whether it is adequate.  My employer offers a pretty good long term disability policy so I didn't feel it was necessary to purchase any more. 

Also, you just need to look into how your employer structures its additional insurance offerings.  If it is structured as a benefit tied to your employment that terminates if your employment ends, then it is worth considering whether it would be better to purchase your own.  But if you simply get a preferred rate and the contract stays with you even after you leave your employment, then it probably makes sense to take advantage of what your employer offers. 

jeromedawg

  • Magnum Stache
  • ******
  • Posts: 3268
  • Location: Orange County, CA
Re: Term Life and AD&D through employer
« Reply #4 on: January 07, 2016, 12:02:22 PM »
what are those 20 year and 10 year riders you refer to that you added to your base 30yr?

They are just additional term life insurance.  Rather than having three different term life insurance policies, State Farm structured it as a base policy with riders.  It probably reduces their administrative burden.

I'll have to look into long term disability too - I'm assuming that we'd be better off purchasing that independent of whatever my employer offers?

Caveat: my employer happens to be a large financial institution that offers these types of services but I assume that, as with any employer, if I quit or am terminated, the plan goes out the window regardless...

Not necessarily.  Just consider what your employer offers and whether it is adequate.  My employer offers a pretty good long term disability policy so I didn't feel it was necessary to purchase any more. 

Also, you just need to look into how your employer structures its additional insurance offerings.  If it is structured as a benefit tied to your employment that terminates if your employment ends, then it is worth considering whether it would be better to purchase your own.  But if you simply get a preferred rate and the contract stays with you even after you leave your employment, then it probably makes sense to take advantage of what your employer offers.

So the 20 + 10 was just to extend your 30yr? So you'd be covered for 60 years total? Was it more cost-effective doing it this way as well?

Regarding whether or not the benefit gets terminated - it sounds like it does. Despite the fact that the company offers life insurance services themselves, they use a different group to provide these benefits for employees and they will terminate upon termination of the job. The HR rep did say that per COBRA, I could carry over the coverage but I don't think that's the same and it seems like I'd still be better off purchasing independently.

Oh the HR rep also said that now is the only time I could enroll without having to do a health check screening/exam for qualifying for whatever insurance I want to buy. Not sure if that's a huge deal other than avoiding an additional inconvenience
« Last Edit: January 07, 2016, 12:43:36 PM by jplee3 »

AlwaysLearningToSave

  • Bristles
  • ***
  • Posts: 437
Re: Term Life and AD&D through employer
« Reply #5 on: January 07, 2016, 12:53:42 PM »
So the 20 + 10 was just to extend your 30yr? So you'd be covered for 60 years total? Was it more cost-effective doing it this way as well?

No.  The start date of the three "policies" is the same.  If I die in the first ten years after the policies begin, three "policies" pay out and my family receives $XXX.  If I die between 10 and 20 years after coverage starts, two "policies" pay out and my family receives $XX.  If I die between 20 and 30 years after coverage starts, one "policy" pays out and my family receives $X.  My thinking is that our wealth will accumulate over time (knock on wood) and we will have less need for life insurance the longer I live.  By 30 years out, I shouldn't need any insurance.

Edit to add:  I think it was more cost effective than purchasing three different policies somewhere else.  Its kind of hard to comparison shop for life insurance because of the physical exam requirements.  I probably could have shopped around more than I did, but from the handful of places I looked, this seemed to be the best bet.  I wanted to buy all of the life insurance I will ever need in one shot while I am young and inexpensive to insure, rather than buying a big policy now only to need to go back and reevaluate in the future. 

Regarding whether or not the benefit gets terminated - it sounds like it does. Despite the fact that the company offers life insurance services themselves, they use a different group to provide these benefits for employees and they will terminate upon termination of the job. The HR rep did say that per COBRA, I could carry over the coverage but I don't think that's the same and it seems like I'd still be better off purchasing independently.

Oh the HR rep also said that now is the only time I could enroll without having to do a health check screening/exam for qualifying for whatever insurance I want to buy. Not sure if that's a huge deal other than avoiding an additional inconvenience

Yeah, you might be better off purchasing independently.  The younger/healthier you are when you purchase insurance, the lower your premiums will be.  If you were to go with your employer's coverage, your biggest risk is that you would become uninsurable (because of illness, for example) while employed by your current employer and then need to leave your current job.  If that happened you could find yourself without coverage and unable to purchase replacement coverage. 
« Last Edit: January 07, 2016, 01:00:49 PM by AlwaysLearningToSave »

davisgang90

  • Handlebar Stache
  • *****
  • Posts: 1289
  • Location: Roanoke, VA
    • Photography by Rich Davis
Re: Term Life and AD&D through employer
« Reply #6 on: January 07, 2016, 05:14:32 PM »
So am I the only one who thought AD&D was Advanced Dungeons and Dragons? 

Ok, sorry.

neo von retorch

  • Magnum Stache
  • ******
  • Posts: 3629
  • Location: SE PA
    • Fi@retorch - personal finance tracking
Re: Term Life and AD&D through employer
« Reply #7 on: January 08, 2016, 03:25:53 PM »
So am I the only one who thought AD&D was Advanced Dungeons and Dragons? 

Ok, sorry.

Came here to say that if it's 5th Edition and they are bringing supplies and snacks, I'd be OK with staying late from time to time...