California health
insurance
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Understand
California health coverage
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Life coverage as part of Health PlanPurchasing Life
Insurance Through a
California Health Plan
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.
California 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 in California 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.
Call us at 800-320-6269 with any
questions. Our services are free to you as
licensed health agents.