Cancelling Volunteer Life Insurance

[epad1966]

Hello, I live in NV. I became eligible for benefits on March 1, 2011. I am pleased with most of the benefits however I have discovered that I am being charged 5 to 10 times higher for my voluntary life insurance. I know I should have researched it more but I assumed it was a good rate since it was a large company. The company is charging $400.00 for $350,000. I have priced this out and can get this from several different companies for $36 to $65 per month for the same coverage. Now the company tells me that I cannot cancel until next March. I have read about the IRS governing this and that only a life changing event is allowed, but what about extortion. I mean how can I be obligated to pay $4800 for something I can get anywhere for $600. Please let me know of anyway to legally cancel this policy. Although it is my fault for not checking I do not feel they have the right to rip me off in this manner. Sadly enough I have been paying almost this much at my last job. I should have done my research earlier. Please help with any info and please do not tell me it was my fault, I already know that.

Thank You,

Eric

p.s. This is a voluntary supplement insurance, not company paid in any way.

 

[ShyCat]

Offering life insurance for $4800 that you now believe you could have gotten for $600 somewhere else is not extortion. It was a benefit that you accepted and cannot change until open enrollment or a relevent life-changing event. That you now feel ripped off does not change any of those facts.

 

[Mass_Shyster]

You can always leave.

Seriously, if you are overpaying by $4,200 for a year's worth of coverage, it may be worth looking for another job.

You can also ask your boss if he would re-hire you if you quit. That way, you could quit and re-sign as a new employee without the life insurance coverage.

You can also read the policy carefully and see if any hazardous activities (like skydiving) will void it. Then take up one of those activities, let them cancel it, and quit the hazardous activity.

 

[Beth3]

You're paying $400 a MONTH for this life insurance policy? Yowsa. Your employer got some really bad rates or selected a really overpriced carrier for the supplemental life insurance.

I have read about the IRS governing this and that only a life changing event is allowed, but what about extortion.

Making a poor decision about what benefits to buy through your employer is not an allowable reason recognized by the IRS. Here's the thing, as it appears your payroll deductions for your benefits are being made on a pre-tax basis and are therefore subject to 125B tax regulations.

You CAN cancel the policy. You just change change your salary deferral for the premiums you are paying. Two entirely different sets of regulations come into play here (assuming you are indeed paying for the life premiums pre-tax under a qualified 125B program.)

You can either quit or you can wait for March. Or you can have a "qualifying event" - get married, get divorced, have a child, etc.

 

[epad1966]

Thanks for the responses. I realize that I did not do my research. I assumed since the medical insurance very good (60 per month for family) that the life was also good. The only thing I have on life thru the company is one years salary. The rest is from another company. I cannot believe that I am forced into a year long contract on a voluntary insurance. Is there not a way to break this. Told my wife we would have to divorce-she reminded me that 4800 was a lot cheaper-lol.
Can I call the provider directly or write them telling them I don't want their services or authorize their deduction.

Eric

 

[cbg]

No. The contract is between the insurance carrier and the employer. You are not a party to the contract, even though you are provided with (and pay for) the benefit.

If the life insurance is subject to IRS regulations, then there really truly is nothing you can do until the next open enrollment period.

 

[Beth3]

Is there not a way to break this. Told my wife we would have to divorce-she reminded me that 4800 was a lot cheaper-lol.
Can I call the provider directly or write them telling them I don't want their services or authorize their deduction.

I wish there was. As I said above, if you are paying the life insurance premium on a pre-tax basis, then the ONLY WAY you can change your deduction (and cancel the policy) is if you have a qualifying event as defined in tax law. 125B plans (i.e. pre-tax premium payment plans) are highly regulated - there just aren't any loop-holes.

Besides, the insurance company has absolutely no authority to address or change your payroll deductions. Only your employer can do that and they're not going to violate tax laws to do this for you or anyone else.

 

[Beth3]

Of course if you die while the policy is inforce, then you will have more than made the premiums back. (Sorry, I just couldn't resist.)