It has become pretty common in the California health insurance market to also add a limited suite of term life insurance products along with the main health benefit. This is true for both Small Group (2-50 employees) and individual/family coverage. It typically has the feel of dental insurance in that it is treated as a "rider" to the main health insurance. Let's take a look at the pro's and con's of this approach to what is a very important part of your insurance planning.
First, a quick definition of term life insurance
There are
two main
types of
life
insurance on
the market:
term and
whole life.
Term is the
simpler of
the two in
that you pay
premium for
a given
period of
time of
coverage
which pays
out a fixed
amount to
beneficiaries
if a person
passes away.
There's a
whole
separate
market for
life
insurance so
we won't
delve too
deeply into
the various
options and
twists.
Most of the
life
insurance
offered as
part of
health plan
options is
term by
nature so
we'll
concentrate
on that.
Keep in mind
that on the
group
market,
there are
many options
that are
marketed and
sold
directly to
companies
from
traditional
life
insurance
carriers.
The plans we
are
discussing
are those
offered by
health
insurance
carriers as
an add-on
benefit to
the core
medical
plan.
Since you
can buy term
life through
your health
plan or
stand-alone
from a life
insurance
carrier,
which is the
best
approach?
Buying life
insurance
through
health
carriers
versus life
insurance
carriers
There are a few distinctions between purchasing term life from health carriers versus life carriers.
When you purchase life insurance as part of your California health plan, the amounts are typically limited both in flexibility and maximum amounts. For example, the allotted amounts for individual/family health plans might be $10K, $25K, $50K, and $100K. This is considered a fairly low amount for life insurance. If purchased directly from a life insurance carrier, the amounts are more flexible with price points at $250K, $500, $1 million and so on. Based on your life insurance needs, term life offered through the health plans might not be adequate. It's more of a quick and easy fix which leads us to the other big differences.
A physical including blood work is typically needed when purchasing life insurance direct. The medical questionnaire is much more involved as well. Additional medical information is usually not needed when purchasing through a health plan. The carrier may underwrite differently between the life and the medical insurance which means you may qualify for one but not the other. A physical is generally not needed as part of the underwriting process.
Life insurance purchased directly through the life carrier tends to be less expensive in premium per dollar of coverage. Part of this is just that they are offering larger amounts and economies of scale come into play but the more thorough medical underwriting is also a factor. Also, when purchasing directly through the life carrier, you typically lock in your rate based on the age at the time you purchased the coverage where health plan life insurance can up as you reach the next age band. Essentially, you are paying for the convenience of one process (both medical and life) which is simplified but for lower amounts of protection.
Group life insurance as part of medical
With Small Group options, there are a few differences of importance. First, there is typically a larger range of life insurance amounts that you can choose from. The range usually goes up higher as well. Group life insurance may be guaranteed issue depending on the carrier which means that if a certain percentage of employees participate, individual employees cannot be declined for health issues. There are typically options to add different levels of coverage based on criteria such as managment, full time/part-time, etc.
Ultimately,
the
primary
deciding
factor
is a
comparison
between
cost
(per
dollar
of
coverage)
versus
convenience
when
looking
at term
life
through
a health
carrier
or
direct
through
a life
insurance
carrier.
To
run your
instant
health
insurance:
California
Individual
Family
health
insurance
quote
California
Small
Group
health
insurance
quote
