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I Have Life Insurance Through My Job. Is This Enough?

by | Apr 2, 2022 | Insurance Tips

Congratulations, beloved! You just got a new job, the pay is excellent, and the benefits are amazing! You have just heard that one of the benefits through your employer is a Life Insurance Policy at little or no cost to you. 

My advice? Take the insurance! 

Group life insurance paid by your employer is usually always a good idea. However, there are a few things you may have not thought about. First, let’s examine what Group Life Insurance is.  

What is group life insurance?

Many employers offer free life insurance as a benefit. These employer-provided life insurance policies are sometimes referred to as basic group life. More Americans are covered by these workplace plans than individual plans, according to a 2017 study by the Life Insurance Marketing and Research Association, better known as LIMRA.

Coverage amounts are typically low, often ranging from $25,000 to a multiple of your annual salary. Coverage is generally guaranteed, which means you don’t need to take a medical exam or answer health questions to qualify.

Because basic life policies are free and coverage is typically guaranteed, there’s no reason not to accept it. All you have to do is sign up, and sometimes enrollment is automatic.

Supplemental group life insurance

Many people opt to buy more insurance, known as supplemental life insurance, through their workplace plans.

The coverage available varies among companies but can reach $500,000 or five times your annual salary. The higher amounts mean you may have to fill out a health questionnaire. The results are used to calculate your rates and eligibility for coverage.

Group Life Insurance Limitations 

As a rule of thumb always secure supplemental insurance separate from your employer. Here are three disadvantages to getting coverage at work:

  1. Coverage is tied to your job. If you leave your job, you may not be able to take the policy with you. This is often referred to as the policy’s portability. You might be able to convert your group policy to individual life insurance if you leave, but the cost usually goes up significantly. If your next job doesn’t offer group life insurance, you could buy an individual policy from the open market. However, the cost of life insurance typically increases as you age, and you never know if you might develop a medical condition that could seriously raise your rates or leave you uninsurable. 
  2. Limited choice. Coverage through work tends to be a type of term life insurance. Term insurance is tied to a relationship or a time period. In the case of your work insurance, you have to be an employee at the time of death for your policy to be in force. If you get sick and are no longer able to work, that insurance you relied on most likely will disappear. Which is a frightening position to be in.

Consider this. An employee is 7 years away from retirement. She becomes ill and has to use up her sick days. She goes to a specialist who diagnoses her with Cancer. Her condition worsens and she has to quit her job. Now terminally she attempts to apply for life insurance but is denied coverage.

So what is the best option?

Consider also getting a permanent policy in addition to what your job offers. Consult a licensed professional. Life Insurance is based on your age, so as you get older, your premiums increase. 

It’s a policy you can count on. Because term insurance is temporary, having a permanent policy where rates are locked in is usually always a great choice. It’s something you and your family can count on.

Permanent policies like Whole Life build cash value.

Your premiums never increase, unlike with a term policy. 

In the end, sitting with a licensed professional is the best way to assess your family’s needs and concerns and choosing a plan that provides great coverage and also fits within your budget.

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