Monday, November 2, 2009

A Puzzling Insurance Situation

JDA provided me with the typical group term life insurance, in the amount of twice my annual base salary. This was another benefit that I lost on September 30. A couple of weeks ago, I received a letter from the life insurance company, offering to convert to a very expensive individual whole life policy. By "expensive" I mean that I would have to pay in excess of $700 monthly for coverage in the same amount as before.

The letter referred to this as "an option", so I queried the JDA benefits admin on whether there was maybe another option, namely one that would somehow let me just continue the group term coverage, hopefully at substantially lower cost. It took her awhile to arrive at the answer, which I reproduce unedited here, since it seems to me to be immune to paraphrase:

"There is an option to port a policy but associates on leave aren't eligible to port, they can only convert to a whole life policy. Most policies are set up this way because the likelihood that someone on disability could pass increases and the rates on a portability policy wouldn't be sufficient to cover if a death claim were filed.

The other thing I wanted to add about converting is that there is a premium waiver built into the policy. The premium waiver is a waiver of premiums after you have paid 9 months of premiums. You will also get those 9 months of premiums back. In order to qualify for this though, you would have to convert the policy, be on disability 9 months and pay the premiums for 9 months."

To me, this seems inconvenient and arbitrary. In order to determine whether or not to convert, if I care about recovering the premiums, I would have to be able to predict whether or not I am likely to be disabled for 9 months. But also I am reluctant to head into a stem cell transplant sans any life insurance, since the probability that I won't survive the process is (to use the Hopkins oncologist's expression) "not zero"; if it's my time to go, I would like to go believing that I have left my wife in the best possible financial situation I was able to manage. So I have a major conundrum to crack here.

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