Life insurance through a union or professional association

Unions and professional associations offer life insurance to members in two main ways: a benefit funded by dues or negotiated with an employer, and optional coverage that members buy at group rates. The first is often modest but free to the member. The second is usually simple to get, with few or no health questions, but the price, the coverage cap and the reductions at older ages need checking against what you could buy on your own. In both cases coverage usually depends on staying a member.

This guide covers the details beyond association and credit union life insurance and group life vs individual life insurance.

The three kinds of plans

1. Union-negotiated or union-funded benefits. Many collective bargaining agreements include group life insurance, and some unions run benefit funds that pay for coverage for members and their families. A multiemployer plan, in which several employers contribute under union agreements, is typically a welfare benefit plan under ERISA, which sets claim-handling and appeal rules for those plans. The amount is usually a flat sum or a multiple of pay, and it is often modest; your plan document governs.

2. Voluntary coverage offered to members. The union or association endorses a program from an insurer, and members apply and pay premiums themselves, by dues deduction, bank draft or bill. This is the typical "professional association" plan for lawyers, engineers, teachers, nurses and similar groups. It resembles voluntary life insurance at work.

3. Endorsed individual policies. Some associations market individual term or whole-life policies to members at member rates. These are not group coverage, and the policy stays with you even if you leave the association.

What these plans usually look like

Details differ by plan, but the common design choices matter more than the brand:

• Simplified underwriting. Many offer a limited amount with few health questions (guaranteed issue) or a short questionnaire, and ask for a medical exam only above a threshold. That helps people with health problems and costs healthy people.
• Age-banded premiums. Group term rates usually rise in five-year age bands, unlike a level-term policy priced once. Cost can climb steeply in your 50s and 60s, and rate increases for the whole group are possible.
• Benefit reductions. Many group plans cut the benefit at certain ages, such as 65 or 70, or end it at retirement.
• Caps. Maximums are often lower than a family with a mortgage and young children needs.
• Portability varies. If you leave the profession, move or let your membership lapse, coverage may end. Some plans allow portability or conversion to an individual policy, often at higher cost.
• Compensation. Associations often receive revenue from the insurers whose products they endorse. That is not improper, but it means the endorsement is not an independent rating. Ask how the association is paid.

A checklist before you enroll or renew

1. Get the certificate of insurance. It states the benefit, reductions, exclusions, when coverage ends and conversion rights.
2. Ask what ends coverage. Leaving the union, changing jobs, a strike, retirement and nonpayment of dues are common triggers.
3. Check the price curve. Ask for the premium schedule by age, not only today's rate.
4. Find out about portability and conversion. Can you take coverage with you, at what price, and by what deadline? See keeping group life insurance when you leave a job.
5. Check the beneficiary. Union forms are often filled out once at enrollment and forgotten; confirm who is named.
6. Compare with a quote. Get individual term quotes for the same amount and compare totals over the years you need coverage; the life insurance quote comparison worksheet helps.

A hypothetical comparison

Say a 40-year-old healthy nonsmoker is offered $250,000 of association term at a group rate that steps up every five years, with coverage ending at 70. She also gets individual 20-year term quotes for $250,000. The group plan may be cheaper in the first years and then cross over as her age band rises, while the individual policy stays flat for 20 years and is hers regardless of membership. For someone with health conditions that would make individual coverage costly or unavailable, the group plan may be the better or only option. These are illustrative; real prices depend on the plan and her health.

When it makes sense to keep it

• You have a health condition that makes individual underwriting expensive or leads to a decline.
• The benefit is free as part of your union membership, so it costs nothing to keep.
• You use it as a supplement to a primary individual policy rather than your only coverage.
• The plan offers a conversion right you may need when you leave.

When to buy your own

• You are healthy and would qualify for good individual rates, especially if you can lock a 20- or 30-year level term.
• You want coverage that does not depend on membership or employment.
• The group amount is small compared with your need. Size that need with the How much life insurance do I need? or How much life insurance do I need?.

If the plan denies a claim

For a union fund covered by ERISA, the plan must give a written explanation and an appeal process; see Employer life insurance, ERISA and beneficiary disputes for how those disputes work. For insured association plans, a complaint can go to the state insurance department; see how to file a complaint against a life insurer.

Key takeaways

• Union benefits are often free but small, and association plans are easy to join but may be priced by age bands and reduced at older ages.
• Coverage usually depends on membership, so check what ends it and whether you can port or convert.
• An association's endorsement is not an independent rating of the product; ask how it is paid.
• Compare the group price over the whole period you need coverage with individual term quotes, unless your health makes individual coverage hard to get.
• Keep the beneficiary designation current.