Term life insurance options - CPA

[Aphalite]

Apologize if this has been address before on the forums as I wasn't able to find a related topic from a quick skim of the search results. We're about to start a family and so I was looking into term life options (15 year 500k). I found rates on online insurance exchanges to be about $185 for me and $175 for my wife, which is $360 total annually.

Wife found the following rate sheet for CPAs - http://www.cpai.com/Documents/PDF/Life/6600-Life-Rate-Sheet-Testimonial.pdf - $23 a month or $276 for the first three years and then $384 a year for the next five, etc.

This seems like the better deal when cash refunds are factored in. But I'm not terribly familiar with how term life insurance works - does term life rates increase annually? I think this rate sheet is still term life but just renewable every year? And group rates can be hiked if they so please? Does anyone (CPAs or otherwise) have any experience with this type of insurance offering?

Thanks for any advice

[mxt0133]

There are various forms of term life insurance, the most common is level premium where the policy premium is constant through the duration of the insurance.  There is also renewable term where you can choose to renew on a yearly term but the premiums will changes.  The idea is that as you progress in your career you can afford the higher payments in the later years.  Most renewable term policies do not need proof of insurability to renew but you should verify that.

Either way you go the insurance company will make the same amount of money as the risk is the same on their end.  It's just how you choose to pay for it.

Also what do you mean by "cash refunds"?

[Aphalite]

Also what do you mean by "cash refunds"?

I'm afraid I don't have an answer either. Apparently a percentage of the premiums you pay is refunded to you at the end of the year - which is the confusing factor for me, because it sounds like a CSV to me

[Dollarbill49]

Is this through the AICPA?

[mxt0133]

That could be a dividend paid back to the policy holders for a mutual insurance company.

[RadicalPersonalFinance]

Research and buy annual renewable term insurance, not level term insurance.

Ask whether or not you lose coverage or have to convert to a different type of coverage when you leave the AICPA. I can't remember if you do or not.

[MathNinja]

I work at an insurance company and am pretty familiar with this product.
Nearly all term insurance policies sold over these exchanges are "level term" meaning they cannot increase the premiums over the "term" of the policy (often 10, 15, 20, or 30 years). This is typically the lowest premium way to buy insurance and I agree that it makes sense to have some coverage when starting a family.
I assume that cash refunds refer to a fairly recent product innovation where there is some "surrender value" when you "lapse" a policy (sorry to keep quoting stuff, but insurance talk tends to be pretty jargony). In general, these policies costs a little more and my feeling is that I wouldn't pay for the additional liquidity - I wouldn't buy for a longer period than necessary and so there wouldn't be a need to lapse.
BTW, I think that going about this purchase via an online exchange makes a ton of sense - cheapest price should win (for other policy types, the strength of the company becomes important, but this is not too important for term as the features you are interested in are guaranteed) as there is a backstop for insurance policies akin to the FDIC backstop for banking deposits.
Hope that helps - MathNinja

[mustachinator]

The core CPA life insurance coverage is not level premium term, it is a term policy where the premium increases over time based on your age.  While young this product is probably the most cost effective you can get after factoring in anticipated refunds which have historically been in the 50% range.  However you can only get this insurance if you are a member of the AICPA.  If you are younger and are looking for only a 15 year term this product will probably be your best bet if you are a member of the AICPA and intend on being in the AICPA for 15 years.  I believe you have to be a member of the AICPA in order to maintain this coverage.

There is a separate level premium term coverage also available from the AICPA.

[Aphalite]

Thanks for all the advice gang. Sounds like the basic policy on the exchange would be better, as we're not sure if we'll have the option to get reimbursed for AICPA membership fees forever through work - which then wouldn't make the finances in favor of this policy.