The primary purpose of any insurance is to transfer risk. Life insurance transfers the risk of dying prematurely by providing financial compensation to those impacted by the insured's death. The simplest way to estimate how much to take out is to take your annual salary and multiply it by the number of remaining working years.
EXAMPLE: You are 40 years old with a salary of $100,000. You plan to retire at 60. The estimated amount you need is $100,000*20 = $2,000,000.
Once you have determined that you would like to transfer your risk of premature death and have calculated the amount you need, you can start looking at life insurance plans: AbbVie has programs available to employees within your benefits.
AbbVie Basic Group Life Insurance
AbbVie offers term life insurance to all employees from day one of employment at no cost to the employee. The Basic Group Term life insurance is 200 percent of your basic annual earnings rounded to the next 1,000, with the minimum coverage being $30,000. Also, if your salary increases, your benefit will increase.
EXAMPLE: Your Salary is $100,000. Your Basic Group Life Insurance benefit would be $200,000
Here is AbbVie's specific definition of your "Annual Salary":
AbbVie Supplemental Group Life Insurance
The Supplemental Life Insurance program gives you the option to add additional coverage to your Group Term Life Insurance. You must pay for the supplemental plan, and your premiums are calculated based on the amount of death benefit, your age, and whether you smoke. You can elect seven additional coverage levels starting from 100 times your salary up to 700 times your salary in multiples of 100. The maximum amount of benefit you can have between your group and supplemental plans is $7.3 Million. As your salary increases, so does the supplemental coverage and premiums in a proportional manner.
EXAMPLE: Your Salary is $100,00. Your Basic Group Life Insurance benefit would be $200,000, and you elect to add $100,000. You now have a total of $300,000 death benefit.
You also can purchase coverage on any dependents under the age of 26. Refer to your benefits book for details.
Go to https://abbviebenefits.ehr.com to enroll in Supplemental Group Life coverage
Medical Underwriting
One of the benefits of participating in life insurance programs through your employer is acquiring coverage without what we call "evidence of insurability," which is also called medical underwriting. The Basic Group Life Insurance Plan and the Supplemental Plans are all offered free of medical underwriting if you apply for them within 31 days of hire. If you want to add Supplement coverage past your 31 days of hire, you will have to be medically approved by the insurance company.
Reduced Coverage at age 65
If you choose to work past your 65th birthday, your coverage will be reduced to 60%. Your premiums for the Supplemental portion are reduced by the equivalent amount.
What if I decide to leave AbbVie for another opportunity? What happens to my Life Insurance coverage?
As soon as your employment terminates with AbbVie, your Group and Supplemental Life Insurance benefits will end 31 days after your official employment termination date unless you choose to "port" or "convert" your coverage.
Porting your coverage means extending it for a specified period. An age-weighted factor may reduce the total benefit, but you get to maintain group premium rates, which are preferential compared to an outside policy of similar values.
Converting your coverage means transitioning your Group and Supplemental plans into an official individual policy with the insurance company. You can do this without "evidence of insurability" (no medical underwriting). You will pay retail premiums based on age and coverage amount as if you were applying for the policy through regular channels.
Decisions About Beneficiaries
Beneficiary decisions are specific to each individual and family situation. Some may choose to leave their life insurance proceeds to their spouse, others may choose their children directly, and blended families need to have a deliberate design in these elections. Be sure to speak with an Estate Planning attorney to determine what’s the best election for you.
A Conclusion and Final Thoughts
One of the best advantages you will experience from working with a financial planner, outside of their extensive expertise, is their ability to keep complex situations simple. Your financial planner can help you decide what you want your life insurance program to do for you and the best place to acquire coverage. Typically, employer-sponsored life insurance programs are not portable, which is their main disadvantage, but not in this case. AbbVie's plan is portable, and premium rates for supplemental coverage are pennies on the dollar and an excellent way to acquire additional coverage if you need it. Bottom line, AbbVie's Life Insurance program is an excellent option for this risk transfer in your financial plan, and its use is recommended.
If you would like more help fitting AbbVie's Life Insurance plan into your financial planning. Contact me at dave@retirementmattersillinois.com.