Life Insurance for Accountants: A Whitepaper Comparison on AICPA Term Rates vs. Market Rates BROOKFIELD

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1 Life Insurance for Accountants: A Whitepaper Comparison on AICPA Term Rates vs. Market Rates BROOKFIELD INSURANCE PARTNERS The Trusted Partner to Insurance and Financial Professionals

2 As financial professionals, certified public accountants realize and understand the importance of owning life insurance to protect their families and businesses. Most accountants carry large amounts of life insurance and especially term life insurance. Many take advantage of coverage offered through associations such as the American Institute of Certified Public Accountants, the AICPA. While the AICPA plan is convenient and has advantages, it's not always as affordable as other options and has a few other drawbacks. The following information will provide a general overview of the AICPA life insurance program. AICPA Term Life Insurance Overview The AICPA group life insurance program is underwritten by the Prudential Insurance Company of America in Newark, New Jersey. The AICPA plan is available to all association members as well as members of other qualified organizations, such as the State Society of Certified Public Accountants. In order to secure coverage through the AICPA plan, you must reside in the U.S., Puerto Rico, the Virgin Islands, or Guam. AICPA Term Life Insurance Policy Limits The AICPA offers term life insurance protection up to $2,000,000 if you are under age 55 and are a member of both the AICPA and the State Society of CPAs. If you are not a member of your State Society, you are only eligible for $1,500,000 of coverage up to age 55. Upon reaching age 55, coverage limits begin to decrease. At 55, the maximum coverage will be $1,500,000 from ages 55 to 64 and $1,000,000 from 65 to 69 and $500,000 from age 70 to 74. At age 75, your insurance amount will be reduced to 25% of existing coverage or $250,000 whichever is less. All AICPA coverage terminates at age 80. Term Life Insurance Costs with the CPA Association Plan The CPA term life insurance plan offered by the AICPA has two different rate classes for determining policy cost: the select class and the standard class. With either class the rates increase every five years beginning at age 30. The select class rate class or preferred health class is available for eligible participants between the ages of 45 and 79. In order to qualify, you must prove your health by disclosing and making available your past medical history and information. The savings at the select class rates can be as much as 40% depending on your age. In order to continue to qualify for select rates, you must submit evidence of your good health every five years to continue to receive the select class rate. If satisfactory proof is not submitted or you are unable to prove your continued good health, your policy cost will be based on the standard rate. Select rates for the current AICPA plan can be found at the AICPA Website. Standard rates require minimal proof of health. The answers to simple medical questions will determine whether or not you can qualify. The insurance costs for the standard health class are anywhere from 25% to 40% higher than select rates.

3 Regardless of the select or standard health class, life insurance costs under the CPA life insurance plan increase every five years beginning at age 30. Cost increases are based upon a schedule that can be found on the AICPA Life Insurance Website. Actual cost may be changed by the Prudential Life Insurance Company of America each plan year. However, if rates are increased, they must be increased for the entire age and class and not for a specific individual or group. AICPA Life Insurance and Premium Refunds The AICPA insurance plan offers a non-guaranteed cash reimbursement feature. All premiums received from AICPA life insurance plan participants and their spouses go directly to Prudential Life Insurance Company of America. Out of the total premium pool, death claims are paid and expenses and fees are deducted. At the end of each plan year, cash refunds or return of excess premiums may be paid by Prudential Life to the AICPA trust account. The trust account then reallocates refunds back to AIPCA plan participants. While this premium refund option is not guaranteed, premium reimbursements have been paid from this AICPA trust account to plan participants since For more information on how the refunds are paid, see the schedule for AIPCA insurance trust refunds. Other AICPA Insurance Plan Options Life Insurance policy riders are available under the AICPA plan and include accidental death and dismemberment and waiver of contributions, also known as disability waiver of premium. Additionally, the AICPA plan offers an accelerated benefit option at no cost. The benefit allows current policyholders that have been diagnosed with a terminal illness the opportunity to receive a portion of the insurance amount (currently 75% of the death benefit up to $1,000,000) prior to death. Any proceeds received are then deducted with interest once the claim is settled. Finally, the CPA term life insurance plan under the AICPA plan also provides for conversion privileges that allow a covered member to exchange the term life coverage for a permanent life insurance policy offered by Prudential without proof of health. While the cost to convert is usually expensive, this is a very valuable policy feature that protects insurability. In addition to term life insurance, the AICPA insurance plan also offers spousal term life and member and spousal group variable universal life. For more information on these plans, see the AICPA website. Conclusion The AICPA life insurance plan, underwritten by Prudential Insurance Company, offers solid term life insurance coverage to its members and their spouses. However, while the plan is good, in many cases it is not always competitively priced and has some major limitations. For a custom price comparison, get a quote here or call Brookfield Insurance Partners (866) You can also get more information about the AICPA life insurance plan by visiting the AICPA Website.

4 Advantages & Disadvantages of the AICPA Life Insurance Plan Most certified public accountants that are members of the AICPA carry some amount of term life insurance through the association plan underwritten by the Prudential Insurance Company of America. While the coverage offered by the AICPA is relatively easy to obtain, in most cases it may not be the best option. The list of the advantages and disadvantages below is designed to provide an objective overview of the strength and weaknesses of the AICPA term life insurance plan. Advantages of the AICPA Insurance Plan: 1. The AICPA Term life Insurance Plan is underwritten by the Prudential Insurance Company of America, a very well respected insurer and rated A+ with AM Best. 2. Preferred rates or a select health class is available for those in great health. 3. Coverage is available up to $1,500,000 if you are under the age of 55 with an additional $500,000 available if you are a member of your State s Society of CPAs. 4. An accelerated benefit option rider is included which allows a covered individual that is terminally ill the opportunity to receive a portion of the death benefit in advance of death. 5. The AICPA plan is relatively easy to qualify for and in most cases there is no medical exam. 6. The AICPA plan offers the potential for policy refunds, or premium reimbursements for premiums paid in excess of death claims and expenses. While not guaranteed, this premium refund or reimbursement option has paid out every year since 1957, see the schedule for AIPCA insurance trust refunds. 7. Policy riders are available such as accidental death and dismemberment and waiver of premium contribution for disability. Also available is spousal term life and dependent children s coverage. 8. The AICPA plan offers conversion options that allow covered members to exchange their term plan for another life plan offered by Prudential Insurance Company of America without proof of health. Disadvantages of the AICPA Insurance Plan: 1. You must be a member of the AICPA to participate. 2. Coverage costs increase every five years. 3. Participants must re-qualify (prove good health) every five years to maintain the lower Select rates. If health deteriorates, participants will be forced to pay the higher standard rate. 4. Coverage decreases over time. 5. Coverage ends at age Premiums are excessive at ages 45, 50, 55 and beyond. Plan participants overpay throughout the year but then may get a refund back at the end of the year based on claims experience and expenses. The premium refund is not guaranteed. 7. Cannot compete with individual level term life insurance. Costs of individual term insurance are much lower and you can guarantee your rate for a longer period of time and there's no requirement for continuous proof of health.

5 How Does the AICPA Term Life Insurance Plan Compare to Low Cost Level Term Life Insurance? The items below identify some of the pros and cons of the AICPA life insurance plan when compared to ordinary level term life coverage. The AICPA Life Insurance Plan: 1. The AICPA insurance program offers members an easy way to get term life insurance. In most cases there are no medical exams and if you are in great health, a preferred health (lower) rate is offered. 2. The AICPA term plan is a 5-year step rate plan with the cost increasing incrementally every five years. I.E , 35-39, 40-44, 45-49, etc. 3. Actual rates are subject to increase in any plan year. 4. For a small additional cost, the AICPA plan offers riders for Accidental Death and Dismemberment, Waiver of Premium for Disability and Dependent Child Coverage. An Accelerated Benefit Rider is also offered at no additional cost. 5. The AICPA plan puts a limitation on coverage depending on you membership level and age. 6. Coverage is overpriced for everyone beyond age 45, especially if the coverage will be needed beyond 5 years. Level Term life Insurance: 1. In nearly every case, in order to obtain term life insurance, you must prove your health by passing a routine physical exam and lab work. The insurance company will evaluate your medical history as well as the results of your exam to determine your actual rate for life insurance. 2. Term life insurance can be purchased in various level periods including: Annual Renewable Term, 5- year level term, 10-year level term, 15-year level term, 20-year level term, 30-year level term and even level term insurance to age Rates are guaranteed to remain fixed during the entire level term period. Obviously, after the initial level period, rates will increase significantly. 4. Most term life insurance companies offer various riders such as Waiver of Disability (Premium) and Accidental Death. Dependent child riders are not available with some level term plans. As with the AICPA Life Insurance plan, most term providers offer an Accelerated Benefit Rider at no additional cost. 5. While most life companies do have a maximum limit on coverage, it is not an arbitrary fixed limit but rather a multiple of income and or net worth that in many cases will far exceed the AICPA plan limits. See the article, financially underwriting term life insurance. 6. Cheap term life insurance, at preferred rates, will be dramatically lower than AICPA coverage costs and offer longer guaranteed level periods. The items above highlight just a few of the major points in which you'll need to consider when comparing level term life insurance versus association group life insurance coverage offered to CPAs through the AICPA life insurance program. For a custom quote you can submit the short form contained in this whitepaper.

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7 Comparison Quote Request Form Agent/Advisor Name: Phone: (If you would like to use your own agent/advisor Fill in name and phone number and we will contact them) Insured Name: Date of Birth: Gender: Male / Female Zip Code: Phone: Health Classification: Preferred / Standard Tobacco Use: Pipe / Cigar / Chewing / Cigarettes If Quit, last use: Medical Problems/Prescriptions: Term Coverage Amount: ($50,000 min.) Term Length: 5 / 10 / 15 /20 / 25 / 30 Height: Weight: BROOKFIELD INSURANCE PARTNERS Fax Request to: (866) Scan/ Request to: info@brookfieldpartners.com By requesting a quote, you authorize us and our agents to contact you regarding term life insurance quotes. We have licensed agents in 48 states.