Did you have the advantage of being offered life insurance through your employer?
But, there are a number of very serious drawbacks that you might not have considered if you are solely relying on life insurance through your employer.
Quick Guide to Life Insurance Through Work
- What’s Wrong With Employer-Provided Life Insurance?
- Examining the Costs
- Coverage Amount – How Much Do You Need?
- Portability – Can You Take it With You?
- What About Your Spouse?
- What’s the Best Solution?
What’s Wrong With Life Insurance Through Your Employer?
Well, there’s nothing wrong with it per se. But, there are a number of things you might not have considered when entertaining these types of employer life insurance plans.
I will say that if you have health issues or a pre-existing condition, these group plans can be very beneficial. But, if you are young and healthy, then you might be better off buying a policy through an independent agent.
There are many valid reasons why you should own life insurance outside of work.
Let’s look at these issues in more detail.
Life Insurance Through Work Generally Costs More
One disadvantage of these Group Life insurance plans is that they generally cost much more than if you had bought the same policy through an independent agent who can comparison shop multiple companies for you.
Some research has suggested that you can save as much as 80% on your premiums by buying a similar sized policy outside of work.
While basic employer-provided life insurance is low-cost or free, and you may be able to buy additional coverage at low rates, your policy’s face value still may not be high enough. Is Your Employer Provided Life Insurance Coverage Enough? Amy Fontinelle, Investopedia
Employer Life Insurance Policies Do Not Provide Enough Coverage
Most policies sold through employer group plans generally only offer much smaller amounts for death benefits. As many as 66% of American who currently have a policy don’t feel they have enough life insurance.
Most plans, when you buy life insurance through your employer, won’t provide policies with death benefits greater than $100,000 and usually they are much less.
A rule of thumb when it comes to selecting a policy that will provide your family with sufficient death benefits should be to estimate 5 -10 times your current annual salary at a minimum.
When you look at what the employer provides and what you really need to cover all your life insurance objectives, the amounts offered will generally fall well short of what you actually need.
Employer Life Insurance Only Lasts While Employed
Almost all life insurance policies that are available through an employer are “not – portable.” This means the policies are only valid so long as you remain employed with the employer who provided the policy.
If you are laid-off, fired or leave that employer to take a job elsewhere, your policy immediately becomes null and void, so you would have no life insurance coverage for your family if that was your only life insurance policy in force.
Keep in mind that life insurance becomes expensive as you age so if you are 45 years of age, and have experienced a decline in your health; you may not be able to afford a replacement policy, or you may even be declined altogether.
Employer Life Insurance Plans Don’t Provide Spousal Life Insurance
Most families these days require 2 breadwinners in the family to provide the financial support they need.
The majority of policies provided through employers provide no coverage options for the spouse.
This can be problematic especially if the spouse’s employer does not provide a life insurance plan for their employees.
Spouses need life insurance as well and regardless of whether they financially contribute to the overall family income, they also provide a vital contribution in multiple other ways, which will have to be picked up and covered by the surviving spouse.
Issues such as daycare, driving the children to events, food purchases, and preparation, plus many other activities may have to be performed by other people.
This may require hiring an employee to perform the tasks that the spouse performed, and could entail many unexpected costs for the survivor.
Why Life Insurance Through Work Is Not the Best Solution
If you are young and healthy, you will find that you can qualify for much more lucrative policies with suitable death benefits that are more affordable and comprehensive than what you could obtain through an employer.
Keep in mind that most employer life insurance plans don’t require a medical exam which sounds convenient in and of itself.
The problem is that most no-exam policies generally cost as much as 2-3 times what you would pay for a traditional life insurance policy which does require a medical exam.
We strongly recommend that if you want life insurance coverage which lasts whether you remain with your current employer or not…and want higher amounts of coverage that will give you proper protection at very low rates, then you should talk to us.
We can also advise you on spousal life insurance and find an affordable low-cost policy for your significant other as well.
Call Huntley Wealth today at 888-603-2876 we can help you get a quote!*While we make every effort to keep our site updated, please be aware that "timely" information on this page, such as quote estimates, or pertinent details about companies, may only be accurate as of its last edit day. Huntley Wealth & Insurance Services and its representatives do not give legal or tax advice. Please consult your own legal or tax adviser.