*Oaktree Financial Advisors is neither endorsed by nor affiliated with Eli Lilly
Eli Lilly benefits enrollment this year begins October 21st and ends November 8th.
We don’t like to think about it, and yet it’s something we all need to consider. If something happened to you today, would your loved ones be cared for financially?
Life insurance is one of the cornerstones of financial planning. The importance of adequate life insurance in an individual’s financial plan cannot be over emphasized.
In the event of an unexpected or premature death, life insurance can provide the financial security your family needs. This life insurance helps make sure they’ll be able to meet current as well as future expenses.
As an Eli Lilly employee you are provided with life insurance of two times your annual base salary at no cost to you. If you have chosen the Company-Provided Death Benefit coverage of two times your annual base salary, you may choose to add additional Supplemental Life Insurance coverage of up to five times your annual base salary.
You should pay close attention to this supplemental insurance and what you are paying for it. The rates for the supplemental life insurance are increasing for 2014 by 26%.
After careful review of these costs for many clients, even before the upcoming price increase, we have found that often-times individual level term insurance is a more cost-effective choice.
The following example is a 42 year old female non-smoker.
She is purchasing the Lilly supplemental insurance of five times her base salary, which in this case is $810,400. She pays $583 per year. Beginning in 2014 the same insurance will cost her $739. An individual insurance policy for the same amount would cost her $625 per year. This will save her $114 per year. Not a huge savings, but because the rates for the Lilly supplemental insurance increase every five years, at age 45 she will be paying $1,293 per year. And then five years after that, at age 50, she’ll pay $1,755 per year. So she could be saving even more in the future. This is a hypothetical example and is for illustrative and informational purposes only. No specific products were used in this example. Actual results will vary and are subject to change. Past performance does not guarantee future results.
If she were to purchase an individual 20 year term policy however, the rates stay level for 20 years, never increasing. Therefore, her total savings over the 20 years is $17,477 if she uses individual insurance instead of the supplemental group term insurance.
Another important consideration is the portability of the insurance. Meaning, can you take it with you if you leave Lilly? The supplemental life allows you two options:
1. Convert your insurance to an individual whole life policy of equal or lesser coverage without providing evidence of insurability. The whole life policy will be more costly than the supplemental.
2. You may transfer coverage to another policy up to one times your base salary with no evidence of insurability and coverage up until age 70.
If you purchase an insurance policy on your own it is completely portable. It doesn’t matter who your employer is.
We recommend leaving any current supplemental insurance in place until after you have applied for an individual policy and it has been issued. Although you can only add supplemental life insurance coverage during the open enrollment period, you can cancel it at any time throughout the year, not just during open enrollment.