In working at AbbVie, the benefits available are substantial. As is typical in most companies, there is a life insurance benefit. But AbbVie also offers numerous supplemental life insurance plans. So, should you be signing up for these?
In Review – Your Basic Coverage
As a full-time employee, your basic group term life insurance coverage is equal to 200% of your basic annual earnings. If you’re a nonexempt employee, your basic annual earnings are your hourly rate multiplied by 2080. If you are an exempt employee, your basic annual earnings are your monthly salary multiplied by 12. Bonuses and overtime do not count.
What is the Supplemental Coverage?
Under AbbVie’s supplemental life insurance options, there are seven options to choose from. You can choose an additional policy that covers 100% of your basic annual earnings, all the way up to 700% of your basic annual earnings. You then have the option of choosing spousal coverage, child coverage, supplemental accidental death and dismemberment insurance, dependent accidental death and dismemberment insurance, and travel accident insurance. You have a lot of options!
What do you need & What will pay out?
Most of this coverage will seem relatively cheap if you’re young. But even though it is cheap, you should only be purchasing what you need. Using rough calculations, your life insurance coverage should be roughly 10 times your annual income. The nice thing about AbbVie’s supplemental policies is that you can get close to that by using standard and supplemental term insurance.
If you need more than what is offered in life insurance and then opt for supplemental accidental death and disability (AD&D) insurance to cover your needs, you may not get everything that you were expecting should you pass away. AD&D Insurance only pays out should your death be accidental, or should you be permanently disfigured from an accident. If you die or become disabled due to health issue, this policy won’t pay anything.
Making sure that you can cover your loss of income with just pure life insurance is very important. Understanding that an AD&D policy will pay out in less cases compared to life insurance means it is less valuable for covering your income.
Is it the best deal for you?
One thing that is not discussed with group life insurance is how it is priced. AbbVie employees, and those of other companies, are put into age-based “bands” and the life insurance cost is based on how old you are. Because of the number of employees taking part and nondiscrimination rules that exist, the health of participants is not take into consideration. With that being said, as you get older, your group term life insurance will start to get more expensive. It’s worthwhile pricing out the same coverage in a private policy and comparing it to your group policy at AbbVie to see if you’re still getting a good deal.
What should you do?
- If you’re covering loss of income due to death, then have it be done with AbbVie life insurance, not an AD&D policy.
- Always compare the coverage and cost of AbbVie supplemental life insurance (if you’re needing more coverage), with a private policy to see which policy matches your situation in terms of cost and benefits.
- Don’t elect to take every benefit up to the maximum. Understand what your family needs in terms of coverage, and only elect that amount.
- If you have a large amount in savings, you may likely need less life insurance, so don’t make this decision in isolation – understand your insurance needs within the context of your entire financial plan.
If you have any questions, you can reach me at dave@retirementmattersillinois.com.