**Lifetime Savings Calculation**

# We Think Fair Rate Comparisons Should be Apples to Apples

See the formula used By SMARTGLIX to arrive at Lifetime savings, as well as how and why it is used.

Demonstrating the cost difference between two like items is a rather simple exercise in arithmetic. This holds true even when the product stretches over several years and has a choice between monthly and annual payments like life insurance. The process of calculating differences and multiplying by the number of payment periods is pretty straight forward. Below is an illustrated example of the lifetime difference in insurance costs (note that the employer plan has a significant price increase at age 60.)

However, the process of demonstrating lifetime savings with life insurance gets significantly more complicated when one of the plans being compared has age related reductions in coverage. Age related reductions are a common stipulation of employer sponsored life insurance plans. An example would be that coverage is reduced at age 70 to 40% of the in-force amount and further reduced to 25% at age 75. **See the chart below **

Because the coverage amounts become materially different over time, it becomes an "apples to oranges" comparison and loses any usefulness.

We have addressed this issue by calculating "lifetime savings" by comparing the cost of any age-reduced employer plans with the cost of an equal amount of private market coverage.

The formula works like so:

If there is $250,000 of coverage that is reduced to 40% at age 70 ($100,000) - at the point of the reduction in coverage, the lifetime calculation formula will use the GLIX monthly rate multiplied by .40 and if coverage is further reduced at age 75 to 25% ($62,500), the calculation will use the GLIX monthly rate multiplied by.25. This provides an apples to apples comparison of the cost of coverage to use for lifetime savings. **See illustration below**.

Note, that the cost per dollar of coverage has exploded at age 70 with the employer plan, but because of the age related reduction in coverage, the monthly payment actually goes down. We have used our "lifetime savings" formula to correct this "apples to oranges" situation, and make the cost of comparing coverage more like comparing apples to apples..

We hope that this clearly outlines the formula we use for lifetime savings analysis. If you have any questions about the lifetime savings calculation or the the SMARTGLIX program in general, we'd love to hear from you. Give us a call at 203-516-2500 or reach out here.