Are You Getting What You Need From Your Employer Life Insurance or Group Life Insurance?
If you're working full-time, you may have been offered life insurance through your job. Sometimes group life insurance is an option as part of an employee benefits package. In some cases, you may be able to also purchase a supplemental life insurance policy through work if you want more coverage.
If you opt for life insurance coverage through work, you may think that's enough to get by. But, in some cases, you could be putting the financial future of your loved ones at risk if you don't consider all your options. Here's what to know about group life insurance through work.
Advantages of Getting Life Insurance Through Work
Group life insurance through your job can be a convenient option. In some cases, an employer will offer a life insurance policy for free or at a discounted rate to employees, as a way to enhance benefits offered and keep employees engaged.
Another benefit of employer life insurance is that you may be able to get a policy even if you wouldn't be able to qualify for one on your own. For example, if you have a medical condition and are seeking term life insurance, it may be more difficult to get approved by an outside provider for a policy.
Always make sure you're aware of the fine print of your work life insurance policy. Some policies will end once you reach a certain age or retire. That's why having a group work life insurance policy in addition to another policy may make sense.
Supplemental Life Insurance Explained
Supplemental life insurance is group life insurance you can purchase in addition to an employer life insurance plan. If you want more coverage than what your employer is offering you, you may have the option to purchase it through the same provider your employer is using.
Supplemental life insurance can often be more expensive than purchasing an individual plan, though. But if you are having trouble getting approved for life insurance through outsider plans, supplemental life insurance may be an option that makes sense.
Why You May Need More Than Employer Provided Life Insurance
Obtaining life insurance through work can be a great start, especially if you don't have a policy yet. But you need to be aware that if you lose or quit your job, you may also lose your life insurance coverage.
The average person changes jobs at least 12 times during their career.1 You'll probably have to consider what happens to your work life insurance policy when you leave at some point. You also don't want to feel compelled to stay at a job you hate just because you have group life insurance through it and won't be able to secure a better policy if you leave.
You may have options to move your old work life insurance policy to a policy with your new job or convert your work life insurance policy to an individual plan, but in some cases, you may not. Talk with your work's human resources department to understand your options. If there's a gap in-between you leaving your previous job and you looking for another one, there will also be a gap in coverage.
Other Considerations in Choosing Life Insurance
Also, you need to examine if your work life insurance policy completely covers you for all the financial needs you and your loved ones have. Things to consider:
- Do you have children?
- Do you and your spouse have bills that require both incomes to pay, such as a mortgage?
- Does your partner and/or family rely on your income?
- How many benefits does your work life insurance policy not cover, including bonuses, commissions, medical insurance and retirement contributions?
If you're young and single, you may opt to just stick with your work life insurance policy. But be aware that life insurance policies tend to be less expensive the younger and healthier you are. And sometimes, certain health conditions will prevent you from qualifying.
If you do lose your work life insurance and decide to apply for personal life insurance coverage, the costs may be much higher than if you had purchased life insurance years earlier — and that's if you're approved. If you plan to have a family in the future, getting one now can help lower your premiums.
And, in some cases, an individual life insurance plan may also be the cheaper option compared to an employer plan, especially if you maintain good health throughout your life. As you age, your work life insurance premiums may rise, even if you stay healthy. You could lock in a lower price now by getting your own individual plan.
How to Determine How Much Life Insurance Coverage You Need
Many people choose to use their work life insurance as a supplemental policy to a larger individual policy. If you have dependents, a life insurance policy that offers coverage about 10 times your annual income will ensure your loved ones are covered for years to come. If your work policy doesn't offer coverage near that, it's probably best to look into a larger term life insurance policy or permanent life insurance policy. Before you get a life insurance policy, try our life insurance calculator to make sure you are covered appropriately and help determine what your life insurance rates could be.
Any time your living expenses increase, it's also a good idea to examine your life insurance coverage. If you're making more at work and are taking on bigger expenses, you need to make sure your life insurance coverage accounts for that. The best thing to do is work with your family's financial advisor to determine what coverage you need, and make sure you are covered now before it's too late and you don't qualify, or costs go up.
If you're offered a free or low-cost life insurance policy through work, it probably makes sense to take advantage of it. But you might also need additional coverage to provide your loved ones with the full coverage they'll need.
Talk with a life insurance expert at AIG Direct for insights on the life insurance policy that will work best for you and your family.
1. https://www.thebalancecareers.com/how-often-do-people-change-jobs-2060467
