Life Insurance FAQ’S
(FREQUENTLY ASKED QUESTIONS)
Life Insurance Coverage– Active Employees
Q – How do I know how much life insurance coverage I have?
Q – Can I cover dependents on my life insurance?
Q – Do I pay for my life insurance coverage?
Q – My spouse has dependent life insurance for me under her employer plan. I didn’t buy supplemental life when I started to work for the City. She lost her job and the life insurance. Can I buy supplemental life insurance now?
Q - Do I have Accidental Death & Dismemberment Coverage?
Q – I cannot remember the last time I reviewed my beneficiary designation. How do I find out who I named?
Q – I have several people to whom I would like to leave my life insurance proceeds. How do I word the beneficiary designation?
Q - I have life insurance with the City. Some of my friends told me I should buy life insurance on my own as well. Why would this be necessary?
Q – What happens to my life insurance if I go out on Family Medical Leave of Absence (FMLA)?
Q - What if I become disabled and cannot return to work?
Q – I am retiring. Do I get the same life insurance at retirement that I get as an active employee?
Q – What is an “accelerated death benefit”?
Q – How do I know how much life insurance coverage I have?
A - Your Collective Bargaining Agreement or employment contract will specify. You should have also received a Certificate of Insurance that includes a schedule of covered benefits. If you do not have a Certificate of Insurance contact the Pension & Benefits office and one will be mailed to you. Your coverage is a multiple of annualized pay rounded to the next 1,000. For example, if your pay is $29,600 per year and your coverage is 2 X pay, then $29,600 X 2 = $59,200 rounded up to $60,000.
A – No. This is an employee only program so no dependent coverage is offered.
A - The City pays for your basic coverage under the group plan. If the amount of basic insurance exceeds $50,000 the payroll department will add a small amount of income to your paycheck. This is called imputed income. The IRS requires employers to calculate the taxable value of employer provided life insurance in excess of $50,000 using their tables. The older you are, the more your imputed income will be because the rates increase with age. The IRS says you are getting a “free benefit” from your employer and that benefit has economic value to you. So although the basic part of the plan is employer paid, you are paying for the tax basis on the excess amount. If a death benefit then becomes payable, it is tax free to the beneficiary.
If you have elected supplemental life insurance, you pay the premium in full for that election.
A – Maybe. You can apply for coverage now, but you will need to complete a Part II application, evidence of your good health. The life insurance carrier will review your application and based upon your current health situation, decide if you qualify for coverage.
A – Again, your Collective Bargaining Agreement will tell you and if you have a Certificate of Insurance that will likewise specify.
A – The City has changed carriers many times over the years and we may not have a current beneficiary designation on file, so it might be a good idea for you to download a new form from the Pension & Benefits web page and update the information. After you do that, it is always a good idea to share the information with family members so they are aware of your wishes.
If there is no current designation on file, the carrier may pay benefits to nearest relatives, according to the policy. This would include, for example, the surviving spouse first, then surviving children, etc. This may not match with what you really want done, so it is a good idea to update your designation as your circumstances change.
In order to pay benefits to an estate, the carrier must be provided with court documents along with the name of the executor or executrix or other designated party.
In order to pay benefits to a trust, a copy of the trust document must be provided. It is best to name the trust as beneficiary so this record is on file with the carrier.
A – Here are a few examples of common beneficiary designations;
Primary Beneficiary – This is the first person or persons to whom proceeds in full will be paid. Many people designate their spouse at 100% or may split among family members - spouse 50% each child (if there are two) 25%.
Contingent Beneficiary – If the primary beneficiary or beneficiaries die, the person or persons named as contingent beneficiary will be paid the proceeds. Think of this as the “back up beneficiary.” For example, if the spouse is primary, the children may be named as contingent beneficiaries. They will be paid if anything happens to the spouse.
There are many configurations when it comes to naming beneficiaries and who you name will depend upon your personal circumstances.
A - It will depend upon your own, personal situation. If your loved ones would experience financial loss as a result of your death, then life insurance is necessary. If the loss cannot be covered by City provided coverage, you may need to buy additional insurance. You also need to consider what would happen if you lost your job, retired or moved to another job where life insurance is not available. Also, many people make the mistake of relying solely upon their employer for coverage, only to find out later when they go to buy additional coverage that their health situation has changed and they are not insurable or they are “rated up” because of poor health. If you buy life insurance late in life, it will usually be expensive.
The best way to determine if you should buy individual life insurance is to meet with an independent insurance agent and review your needs. There are many companies and many, many types of policies available. A professional can help you sort this through. Employer sponsored plans are group plans and therefore cannot address all employees’ specific individual needs.
A – Your coverage will remain in effect up to the maximum time allowed under FMLA if you do not return to work. In Connecticut, the state law is 16 weeks. If you have not returned to active full-time work at the end of the FMLA period, your coverage will cease.
A – Since this is an employer provided program, coverage is designed to cover you while you are actively at work. If you do become disabled, however, there is a Waiver of Premium (WP) feature. If you are out “permanently” you will receive a Waiver of Premium application at the end of 9 months out. You will need to complete and return the form prior to the end of the 12th month following your last day worked and the insurance carrier will make a determination regarding your medical disability. They may ask you to take a physical.
You must be unable to work in ANY capacity, not just your job, but ANY job. If your disability qualifies, your coverage will be continued and any premium waived until you turn 65 or are no longer disabled. You will be asked for medical information each year by the carrier in order to continue on WP. You may also be asked to take another medical exam. If you do not provide this information or comply with the exam request, coverage will cease. If you need additional information about Waiver of Premium, you can see your Certificate of Insurance. Note that the Waiver does not apply to any AD&D coverage. AD&D will terminate.
A - No. Again, this is a group product designed to provide maximum benefits while you are an active employee. Your collective bargaining agreement specifies what you get at retirement which is generally, a flat $3,000 of coverage. This is why it is important to consider buying life insurance outside your employer sponsored program. Conversion of your basic life is always an option, however, you will pay premiums for a whole life product at your current age. This may be quite expensive.
A - If you become ill and are told the condition is terminal within 12 months, the plan allows you to draw down a minimum of 25% of the total value of the life protection, not to exceed 50% of the total value of life protection. This is a one time only option. Medical evidence or a physical exam may be requested. Additional conditions apply, see the Certificate of Insurance. This is a way to help someone in a very serious situation get some additional financial help.