If you’re a CPA, you might be interested in getting life insurance coverage through the AICPA program. Discover more in our AICPA Life Insurance review.
If you’re a certified public accountant (CPA), then you’ve likely heard of the American Institute of CPAs, also called the AICPA. Being a member of this prestigious organization comes with a variety of benefits, one of which is access to the group’s life insurance plan.
In this article, we’re going to go over the various elements included in these policies and see how they compare to life insurance plans with other companies. If you’re shopping around for life insurance, be sure to read this first.
AICPA Life Insurance: The Lowdown
First of all, the AICPA is not an insurance provider. Instead, the organization uses Prudential to cover its policies. If you’re not familiar with Prudential, it’s worthwhile to look into the company before browsing coverage with the AICPA.
Fortunately, Prudential does have an A+ rating with A.M. Best, as well as an AA- grade from Standard and Poor. Looking at these ranks can give you an idea of how well an insurer can cover debts and pay off claims. While Prudential isn’t the best, it’s a top-ten company, so you can feel confident if you decide to buy a policy.
That being said, the AICPA does have control over the terms of your plan. Just because Prudential is providing financial backing and long-term security, rates and details will vary substantially. If you compare similar options from Prudential itself, you’ll notice these variances immediately.
Simply put, the AICPA is offering a group life insurance plan for its members. In some cases, participating in a group policy can be beneficial, particularly if you have health problems or would have trouble getting covered otherwise.
However, if you can buy insurance through a different carrier, the AICPA plans may not be the best choice. Keep that in mind as we go through this review.
What Kind of Insurance Does AICPA Offer?
There are three distinct options available to AICPA members. They are CPA Life, Level Term Premium, and Group Variable Universal Life Insurance. It’s also crucial to note that you can buy policies for both yourself and your spouse with the first two plans.
In many instances, it’s best to have both of you covered in case one dies before the other. Even if you are the primary breadwinner, the loss of a spouse can be difficult to recover from with no plan in place.
Here is a breakdown of each insurance option.
The most basic coverage you can buy is term life insurance through the AICPA. If you’re not familiar with term insurance, it’s the most straightforward option there is. You pick a coverage amount (up to $2.5 million), then you choose how long you want the plan to last.
Typically, term life insurance will last between 10 and 40 years, depending on your particular needs. You can also renew coverage if your plan is going to mature (end), and you need to extend it.
Some notes about the CPA Life Plan:
- Your spouse cannot have more coverage than you.
- You have to remain a member of the AICPA to retain the policy. This fact is true of all plans, so keep that in mind.
- CPA Life ends at age 80, and the latest you can buy a policy is at age 74. Once you reach 80, the plan matures, and you won’t be covered at all.
- Plan members are eligible for a cash refund opportunity, which we’ll go over later in the article.
- There are three rate options – standard, preferred, and select. The preferred rates do require a medical exam to qualify.
- Rates increase based on your age, no matter your health. This means you can expect to pay more roughly every five years or so.
Overall, the CPA Life Plan is relatively standard for term life insurance. However, the cost of this coverage is much higher. We’ll discuss the pros and cons of AICPA’s offerings later on and illustrate why these rates are not very competitive.
Level Premium Term (LPT)
LPT insurance is very similar to CPA Life and comes with many of the same rules and restrictions. However, this plan can be a better option if you qualify, as it will lock in your rates and allow you to extend coverage past age 80. Let’s break down the unique aspects of Level Premium Term Insurance.
- You can lock in your premiums for 10 or 20 years at a time. However, although your rates won’t go up every five years, you will have to pay more from the outset. Be sure to compare your estimated long-term costs to see if this will save you enough to be worthwhile.
- The maximum age to obtain LPT insurance is 65. If you’re already over that, you’ll have to settle for CPA Life or Group Variable Universal Life Insurance. This also means that if you’re between 56 and 65, you can only lock in rates for 10 years, not 20.
- You can continue LPT coverage up to age 95, provided that you locked in your rates accordingly. However, by that point, your premiums will be significantly higher than they were before.
While LPT Insurance does offer some added benefits compared to CPA Life, you’ll still want to do your homework. Also, consider that your health and current age can affect your long-term payment structure, so you might not save that much overall.
Group Variable Universal Life
One of the downsides of term life insurance is that your money doesn’t accumulate a cash value. If you don’t like the idea of paying for something you may never use, universal life insurance can be a better option. Here are the main points to consider if you want to choose this plan.
- Like CPA Life Insurance, the maximum age to qualify for Universal coverage is 74.
- This is a form of whole life insurance, meaning that it will never expire as long as you make premium payments. However, it does mature at age 100, so keep that in mind.
- Monthly rates are also based on your age, so you can expect to pay higher premiums every five years.
- To accrue a cash value, you have to overpay your premiums each month. Fortunately, you can decide how much to add to your account. For example, you can pay a lot more now and let it build tax-deferred until you retire. Then, you can receive an annuity in retirement or let the cash value pay your premiums during your golden years.
- You can borrow against your cash value, but you’ll have to repay it with interest. Also, you’ll have to pay taxes on any gains, but not the money you contribute to the plan.
When it comes to retirement, a universal life insurance policy can be an excellent way to maintain coverage in old age.
Life Insurance Riders Offered by AICPA
If you want to get more out of your life insurance, adding a rider to the policy can provide additional peace of mind. You do have to pay extra for the privilege, so be sure to talk to your AICPA rep before adding anything. Also, not all riders are available for all plans, so you’ll have to consider that.
Dependent Child Coverage
In many cases, life insurance is designed to help your spouse take care of young children if you die. This rider adds an extra $10,000 to the death benefit for every unmarried child under 25. Once all of your kids reach that age (or get married), the rider will mature, and you won’t have to pay it.
Accelerated Death Benefit
Fighting a terminal illness like cancer can be highly expensive. If you need cash to cover medical bills while you’re still alive, you can borrow against the death benefit with this rider. You won’t be able to replace those funds (unless you have universal life insurance), but there is no extra cost for ADB.
Accidental Death and Dismemberment
While life insurance pays if you die from any non-self-inflicted causes, AD&D coverage gives your beneficiaries a little extra. Also, you can receive payment for dismemberment, such as losing a hand, arm, leg, or eye. Specific payout structures will depend on your plan, so talk with your agent.
In some cases, you can waive your premium payments without losing coverage if you become completely disabled before reaching 60. There are some requirements for this rider, so look at the details before adding it. Also, it’s not available for spousal plans, so if your spouse becomes disabled, you’ll have to either cancel coverage or maintain payments regardless.
Other Elements of AICPA Life Insurance
Now that we know what the AICPA has to offer, let’s break down the pros and cons of getting one of these policies.
Cash Refund Opportunity
On the surface, this feature can sound like a benefit, but since it’s not guaranteed, we can’t say for sure. The premise of this opportunity is that the AICPA will refund policyholders at the end of the year if there’s any money left over. However, because there’s no telling what can impact costs throughout the year, you’ll never know how much your refund will be or if it’ll arrive.
When compared to other similar life insurance policies, we can see that the AICPA charges a lot more in premiums. Other insurers simply lower rates rather than offering a cash refund at the end of the year.
For example, AICPA Life Insurance is $480 per year for a 10-year fixed premium plan and $864 for a 20-year plan. Other companies offer the same coverage for as little as $329 and $610, respectively. While you could get the difference back each year, it may not come at all.
Insurance Outside of Employment
Typically, group life insurance is offered by an employer, which means that if you leave the business, your coverage doesn’t travel with you. However, because the AICPA is an independent organization, you can maintain insurance regardless of where you work. That being said, you do have to pay yearly dues to the AICPA, which will be on top of your premiums.
For most individuals and couples, $2.5 million in life insurance is more than sufficient. However, if you need additional funds, you’re out of luck. While independent insurance carriers can go into the tens of millions, you can’t do that here.
Bottom Line: Is AICPA Life Insurance Worth It?
At NextGen Life Insurance, we know all about comparing plans and rates between different companies. Based on our knowledge and experience, AICPA Life Insurance is not worth the high cost and relatively low coverage. Typically, the two best reasons to get group insurance are:
- You can’t get covered otherwise. For example, if you have a pre-existing health condition that would knock you off other plans.
- The rates are cheaper. Employer-sponsored group plans are generally more cost-effective since the premiums are shared among participants.
With AICPA insurance, neither of these benefits exist. You have to submit health questionnaires that can raise your rates, and you’re paying more per year no matter what. Even if you did get a refund, the fact that it’s not guaranteed renders that point moot.
Overall, we highly recommend seeking coverage outside of the AICPA. Not only will you have more options, but you’ll wind up paying less in the long run. Let us help you find the right policy to fit your needs.