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Term Plus: Life insurance plus tax-deferred savings a bonus for Association members

September 03, 2012

By Karen Fox, ADA News staff

ADA Insurance Plans are consistently ranked high among member benefits for good reason.

Included among the group insurance plans provided exclusively for ADA members are Term Life, Disability Income, Office Overhead Expense, MedCASH, and life and disability plans for students. Through Great-West Life & Annuity Insurance Co., the ADA is able to offer additional options that can help members save for the future. One example is the Term Plus Universal Life Plan.

Besides providing life insurance protection for family or other beneficiaries, Term Plus allows you to pay extra toward a tax-deferred savings component known as a Policy Value Account.

Savings accrued in this account can be used for a number of things: to help fund long-term goals such as college for your kids; to supplement your future retirement income; to help keep future premiums level; or you can use the accumulated savings to pay premiums.

Members are currently earning 3 percent tax-deferred interest on their Policy Value Account savings, and the guaranteed minimum rate of interest under the policy is 2.5 percent.

If funded properly, the Term Plus Policy Value Account can be used for extra cash. More specifically, with Term Plus a dentist can withdraw the policy cash value and only pay taxes on the interest earned—and no 10 percent tax penalty like those imposed on early withdrawals from retirement plans such as a 401(k) before age 59.5.

Simply make sure that enough remains in your Policy Value Account to cover the required insurance cost to keep your policy in force.

The policy also permits a loan against your cash value at any time. Your tax professional can provide more detailed information on the tax advantages.

“It’s a great tax-deferred vehicle,” said Tylor Sidener, director of sales and marketing for the ADA Insurance Plans at Great-West Life.

“If you earn 3 percent in Term Plus’ tax-deferred Policy Value Account, that’s a tax-equivalent yield of 4.6 percent if you’re in a 35 percent tax bracket,” Mr. Sidener said. “According to the Life Insurance Marketing and Research Association, universal life insurance such as ADA Term Plus currently has the largest market share in annualized life insurance premium sales. One reason may be because of its flexibility and the opportunity to combine insurance protection with savings at attractive interest rates.”

The ADA Plan also provides up to $3 million in coverage up to age 90. In addition, there are no surrender charges associated with Term Plus coverage—meaning that once insurance is no longer needed, you can take 100 percent of the cash in the Policy Value Account without incurring any surrender charges.

Premium credits, discounts that reduce the premiums you pay based on a plan’s favorable financial experience, are key to the popularity of ADA Insurance Plans among member dentists.

Because premium credits are awarded in advance, rates are discounted at the time each premium is due, even for new participants.

Great-West Life has an A+ rating from the ratings service A.M. Best Co., has been in business since 1891 and has insured ADA-member dentists since 1934.

ADA Insurance Plans are available only to members. Quotes on Term Plus plans are customized for ADA members based on individual needs. To receive your quote from an Insurance Plan Specialist, call 1-866-607-5330 or go to ADA Insurance.