Speaker 1 (00:07):
Hello, I’m Bill Borsema, founder and owner of OC Consulting Group, a fee-based life insurance consulting practice. I want to talk about one of the most ubiquitous forms of life insurance in the market, group term and association term. While seemingly simple and uncontroversial, I’ll suggest there’s more to it than most people realize. Group term is a staple of benefit packages and association term is marketed as a feature of professional groups. It’s easy to enroll and in group insurance, it comes right outta your paycheck. What could be easier? These types of coverages can be appropriate for young people looking for insurance for short durations. But let’s look closer at what happens after the early years of low premiums. We see the proverbial frog boiling in the pot on the stove with one of the more popular association plans at age 45. The premiums triple over the prior five years, and on that same individual at age 50, the cost almost doubles and then it increases by 90% at age 55 and continues to increase by approximately 90% every year up until the age 75 when the coverage gets cut by 50%.
Speaker 1 (01:21):
When you compare to the cost of individually underwritten term, the group term and association term prices are astronomical and the people who figure that out later are shocked by what they’ve been paying. When you think about it, it has to be this way. These are non underwritten policies, and the healthy are subsidizing the unhealthy and uninsurable. Much of this coverage is tied to employment and association. Membership and portability options are very limited. Furthermore, if there is a desire or a need for conversion to a permanent policy, the options are limited and the pricing is ridiculous, especially compared to other options available in the market. If you can favorably qualify for individually underwritten coverage, not only will the premiums be lower and stay lower for a longer period of time, you’re gonna have access to much better products if the premium savings alone aren’t enough. Let me share with you a story of a family friend.
Speaker 1 (02:23):
My mother called and asked me to talk to the wife, who is soon gonna be a widow. 20 years ago, her husband took advantage of the group term and signed up for a $250,000 policy. Last year, coincident with retiring, he was diagnosed with inoperable and terminal brain cancer. He’ll be gone by years’ end and the insurance isn’t enforce. Not only was he overpaying from the beginning, but over the period he was in the plan, the premium went to 10 times the cost of individual term pricing. If he had individual term coverage, he could have kept the inexpensive policy in force, and if he wanted to convert it, he could have to a quality product guaranteed for life for 4,500 a year that he probably could have funded much less than that. Conversely, he didn’t have an option to keep his group term force and the conversion cost $30,000 a year for a quarter million dollar policy. Why did this happen? He didn’t know any better. Expediency, conventional wisdom, lack of knowledge, it’s what people do, right? But let me be clear. If association or group term is the only life insurance available, then by all means take advantage of it. But if you have an opportunity to get your own decent insurance, you’ll be richly rewarded for doing so. Thanks for your time today, and as usual, let me know what I can do to help.