Term Life Insurance

About the Program

While employed at Purdue, you are covered by term life insurance. The amount of coverage varies, depending on your age and the option you have selected. Benefits are paid to your beneficiary in the event of your death from any cause.

If there is no beneficiary at the time of an employee's death the benefit is paid to the first of the following (a) surviving spouse; (b) surviving child(ren) in equal shares; (c) surviving parents in equal shares; (d) surviving siblings in equal shares; (e) estate. This insurance has no paid-up or cash values and generally remains in force only while you are employed at the University.

Purdue’s term life plan has a $15,000 accidental death and dismemberment (AD&D) component that provides a payment in addition to the regular insurance settlement should you die due to an accident. This coverage also pays a benefit in the case of certain dismemberments caused by an accident.

The Choices

The University provides you with an amount of term life insurance equal to your annual budgeted salary, rounded to the nearest $1,000. For 10-month staff, summer earnings are included.  Shift differentials are not included in your annual budgeted salary for determination of life insurance. 

Your coverage increases as your salary increases.

Options offering coverage greater than your annual budgeted salary are available. If you choose to carry one of these higher options, the University will share in the cost for the increased insurance. To determine how much additional coverage is available to you, and your cost for this increased insurance, check the information below.

Term Life Insurance Options Available:

• To age 55, one times, two times, or three times your annual salary

• Age 55-64, one times, two times, or two and one-half times your annual salary

• Age 65-69, one times or one and one-quarter times your annual salary

• Age 70 and over, one times your annual salary

To determine the amount of your life insurance coverage, your annual budgeted salary is rounded to the nearest $1,000.  This amount is then multiplied by the coverage level you have chosen.  (For example, if you have chosen coverage equal to three times your annual salary, the rounded amount is multiplied by three.)  After the multiplication, the resulting amount is then rounded to the nearest $1,000 to determine your total amount of coverage. 

Example:  You earn $34,650 a year.  This amount is rounded to the nearest $1,000, resulting in $35,000.  You have elected coverage equal to one and one-quarter times your annual salary.  $35,000 is multiplied by 1.25, resulting in $43,750.  This amount is rounded to the nearest $1,000, resulting in a life insurance coverage amount of $44,000.

When you select one times your salary, your minimum coverage is $10,000. The minimum for two times salary is $20,000, and the minimum for three times salary is $30,000.  The maximum life insurance coverage available is $1,000,000. 

Annual Employee Cost Per $1,000 of Term Life Coverage Above Your Annual Salary:

Less than age 45	$ .52
Age 45 through 54	$1.61
Age 55 and above	$3.97

These rates are subject to change.

When you move into a new age bracket that reduces your coverage and/or increases your premium, the coverage and/or premium change takes effect on your birthday. 

More Detail

Insurance is effective with your first day at work.

When first enrolling in benefits as a new employee, you may choose an amount of coverage in excess of your annual salary without proving good health. At any time after your initial enrollment, you may request to have the amount of your term life insurance increased or decreased. If you want to reduce the amount of insurance, the request will be effective immediately.

If you want to increase coverage after your initial enrollment period has ended, you will have to prove you are in good health. A health statement will be required, and you may need to have a physical exam. The insurance carrier will determine whether you can increase your coverage.

Coverage Portability

Optional and Dependent Life insurance is portable; you can elect to keep your coverage if you leave Purdue. You may keep your current level of insurance if you terminate employment for any reason other than disability or retirement. 

Portable life insurance can be issued without medical questions; however, if you would like to receive preferred rates, you are required to fill out a medical questionnaire.  You must request portable life insurance within 31 days of your termination or change in status.  The insurance company will bill you for the policy.  It's important to note that the premium rate on your portable policy may be higher than the rate you paid for coverage as an active employee. 

Conversion Privilege

During the 31 days following termination of your employment, you can transfer the amount of your Purdue term life insurance to one of Prudential's whole life policies, without having to furnish evidence of good health. The policy will be effective at the end of the 31-day period, and the premiums will be the same as you would ordinarily pay at your age if you applied for an individual policy. If you die during this 31-day period, the term life benefit will be paid whether or not you have applied for an individual policy.

The 31-day conversion privilege also applies to the reduction in term coverage that occurs at ages 55 and 65. If you die within 31 days of the date your coverage is reduced, the amount of coverage you carried before the reduction will be paid as the benefit.

If interested in converting, obtain a life insurance conversion form from Staff Benefits. Present the form to any Prudential insurance office or agent within 31 days of the date your coverage with the University ends or reduces.

Living Benefit

Purdue’s term life insurance offers a living benefit that allows terminally-ill people to tap into their life insurance proceeds while they are still living. Often the money is used to handle out-of-pocket medical expenses, but it may be used for any purpose.

To qualify for the living benefit, the participant must furnish proof to Prudential that life expectancy is 12 months or less. A doctor’s certification will be required.

The living benefit equals one-half the amount of insurance in effect or $50,000, whichever is less. It may be taken in one lump sum, or in six equal monthly payments. Any amount received as a living benefit is deducted from benefits paid to your beneficiary when you die.

Imputed Income

Internal Revenue Service regulations require that the imputed value of term life insurance in excess of $50,000 be reported on the employee’s W-2 form as taxable income.  Applicable Social Security, federal, and state taxes based on the imputed value of your coverage will be withheld each payday. 

Imputed value is determined from the following IRS table. The table gives the monthly imputed income rate per $1,000 of term life coverage over $50,000.

Rates are based on your age as of December 31 and are subject to change.

Any premium you pay for your term life insurance is subtracted from imputed income. The imputed income is not the amount of extra tax you will pay, but rather it simply increases the total amount of your taxable income. For instance, if you are in the 28 percent tax bracket and your imputed income is $84, your additional tax is $23.52 ($84 x .28).