I was quoted for basic term life by my insurance agent through Auto Owners at what I think are pretty good rates for both the wife and I. They do not have any type of accelerated death benefits however. A friend of mine who is in life ins sales quoted me a similar policy with Foresters, however the Foresters policy has terminal, critical, and chronic riders with it. Free according to him, however the policies are approximately 38% more than the Auto Owners policies without those riders so clearly the "free" riders are baked into the cost. Makes sense I guess, nothing is free of course. I guess my main question is are these accelerated death benefits worth the extra cost? My wife and I are around 40 and in excellent health. I am pretty clueless when it comes to this type of stuff so any help would be appreciated. Thanks
Are Accelerated Death Benefits Worth the Extra Cost?
- Thread starter scowar
- Start date
- 180
I'm actually doing an analysis on this right now but I'm not done with it yet. My gut says that 38% is pretty darn expensive, though.
Here's one thing you should know: almost all policies have accelerated benefits riders (ABRs) built in for free. The only questions are how soon can you access the cash, and under what circumstances, and for how long.
The chief qualification for accessing death benefits early on most free ABRs is that you are terminally ill, within a year of death, and you can only access about 80% of the death benefit. That can change from carrier to carrier. But I think that's a pretty decent synopsis.
The chief criteria for accessing death benefits early on most policies with cost-adding critical illness riders are that you cannot perform two or more activities of daily living, which I'll let you visit wikipedia to learn more about! You can access the death benefit (or some multiple thereof) much sooner. But these are "knobs" that can, with most carriers, be adjusted.
Two things I would suggest:
1) Ask your buddy if you can reduce the critical illness rider so that it only applies to 25% or 50% of the death benefit. You probably can. And that might make the premium less of a hit for you. Play around with the knobs and see what feels right to you.
2) Ask yourself if it is going to make you feel better to have 40% more death benefit with the inexpensive term policy you already found. I'm not saying pull the trigger. But I am suggesting that if that feels better to you, that might be a window into how you really feel about your friend's proposal to go with the Forrester's policy.
The overwhelming likelihood is that you are not going to make a claim on a term life insurance policy, with or without the rider. That's not an argument to forego the purchase. It's just a statement of actuarial fact. I bring it up because I think it's important, if you're probably not going to benefit financially from the coverage, to at least have coverage that makes you feel good and safe while you own it. Those qualitative factors matter. And you should give yourself the liberty to act on them, because in all likelihood, a good feeling during your ownership period is all you're going to get from a term policy.
That's not a knock against term, by the way. I love term and sell it more than anything by far.
I wish I were done with the other article. I'll come back and post a link to my article when it's finished. I'm doing a case study right now. But it's on a long duration policy (to age 100) so it's going to look different, I'm afraid. I'm not sure how relevant it will be.
Either way, good luck!
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- 10,313
Both of those carriers tend to be on the expensive side.
Foresters is NOT a good choice for someone who is in good health. They only have 2 health ratings: Smoker & Non-Smoker. So you as a healthy person get the same Premium rate as people that are unhealthy.
I do not know if Auto Owners has multiple rate classes or not.
Whether the riders are worth it or not just depends. Many carriers have rates MUCH lower than Foresters and do not charge extra for their accelerated benefits riders.
What you need to question is the Premium of both. Not just one.
To give you some perspective, a 40 year old buying a $250k 20 year term policy, can pay as little as $18/m.
That is with multiple A+ rated life carriers such as Pac Life, Lincoln National, Met Life, American General, Protective, Principle, and plenty of others that are in the $18-$22 range per month.
Many of those in that range have Terminal Illness & Chronic Illness Riders that are included in that price.
How your quotes compare to that is what you should be worried about.
Foresters is NOT a good choice for someone who is in good health. They only have 2 health ratings: Smoker & Non-Smoker. So you as a healthy person get the same Premium rate as people that are unhealthy.
I do not know if Auto Owners has multiple rate classes or not.
Whether the riders are worth it or not just depends. Many carriers have rates MUCH lower than Foresters and do not charge extra for their accelerated benefits riders.
What you need to question is the Premium of both. Not just one.
To give you some perspective, a 40 year old buying a $250k 20 year term policy, can pay as little as $18/m.
That is with multiple A+ rated life carriers such as Pac Life, Lincoln National, Met Life, American General, Protective, Principle, and plenty of others that are in the $18-$22 range per month.
Many of those in that range have Terminal Illness & Chronic Illness Riders that are included in that price.
How your quotes compare to that is what you should be worried about.
- 546
As SCagent83 said the policy your friend quoted you is designed for people who are not healthy. It's the relaxed underwriting that's costing you the extra 38%, not the riders. They include those same riders on most their policies which are pretty competitive.
Some of the things that Michael Burton said are completely wrong. He said a lot, it sounds well thought out, but it's wrong.
Basically, it sounds like no one has really gone over with you what you and your wife are looking for. The price needs to be in line with the benefit you feel you are getting.
I'm licensed in Michigan so if you would like some guidance on how to find something suitable for your situation, let me know.
Some of the things that Michael Burton said are completely wrong. He said a lot, it sounds well thought out, but it's wrong.
Basically, it sounds like no one has really gone over with you what you and your wife are looking for. The price needs to be in line with the benefit you feel you are getting.
I'm licensed in Michigan so if you would like some guidance on how to find something suitable for your situation, let me know.
- 10,313
In my experience, not many carriers allow you to play with the % of DB the riders can access. Just a handful. Foresters in not one of them so that is not an option for him or for most people.
- 180
I'll take your word for it. The last two carriers I looked at, Symetra and American General, did have a lot of customization available. But both of them were NLG UL policies.
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I'm fine if you disagree with something I've said. I welcome it in fact. But for the OP's sake, and for mine for that matter, would you at least point it out?
Or is your point just to take a broad brush and discredit everything I say from here on out?
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Also, with Hancock you can dial the knob. That's literally the only three carriers I've looked at for this that I can recall, so since it was all three, I figured that was more the norm.
I've never sold a Forester's policy. Haven't found them to be competitive for the cases I've worked.
- 10,313
Ive never sold a Foresters policy either, but I have competed against them before (if you can call them competition).
Generally speaking, you will find more customization available on UL policies vs. term. But the market is starting to move in the direction of being able to customize Riders more and more. As an agent I want all of the options I can get to create the solution that works for the client.
- 546
No, I was not trying to veer away from the OP's original question like every other thread on this website does.
An ABR is not a single thing, I've seen it include up to three different riders. Terminal Illness, Critical Illness, and Chronic illness. Terminal illness is not always included in a policy, but it is included in most policies today. It's the lowest denominator so to speak. I've seen the advance as low as 50% and as high as 95%. Some companies will only determine at the time of need. The range is 12-24 months depending on the company, the state, or both.
The critical illness rider does not do this. The chronic illness rider does. They are usually free.
As someone who sells pretty much every type of life insurance not just one. I don't think this is a valid way to compare the two policies. He is buying security for him and his family, don't you think he should buy that one that makes him the most secure? That may not be a term policy at all.
Forrester's does have competitive rates, the OP was just not offered one. If all he wants is the death benefit than neither one of those companies is the best value(for term).
I think the living benefits can be a great thing. Most policies have terminal, many have chronic, much fewer have critical. Critical is the most important, as odds are many people will have a potential critical issue at some point in their lives. Not nearly as many with terminal or chronic. I've had one claim on a critical rider on a life policy, and in his case it was a great thing for my client.
The other option is you could always buy the cheapest life policy, and get a stand alone policy that would cover the other stuff. I've not ever priced it that way, no clue how it would shake out.
The other option is you could always buy the cheapest life policy, and get a stand alone policy that would cover the other stuff. I've not ever priced it that way, no clue how it would shake out.
- 180
You make a lot of good points here and I think the information is valuable/educational. I don't see here that anything I said deserved getting my entire post swept to the side like you originally did. But that's water under the bridge.
As for the portion in bold, I'm really curious to learn more about that and look forward to exploring that with my IMO. I've not seen any policies where critical illness or chronic illness riders are free.
What carriers provide built-in cost-free critical illness riders, or chronic illness riders? I don't need a long list. Just a few off the top of your head would be great, if you don't mind sharing.
