Why Get Personal Life Insurance If Your Job Provides a Policy?

Many employers provide life insurance as a benefit to employees. However, employer sponsored policies are often insufficient to protect your family in the event you pass away.

Benefits and Limits of Group Life Insurance

According to a study by the Society for Human Resource Management, 85% of companies offer some type of group life insurance policy to employees. This is a nice benefit, but it may not cover all your needs. Group life insurance policies are limited in scope. These are not individual policies but instead cover groups of employees. The amount paid by group life insurance policies depends on your salary and who you work for. Here are the leading pros and cons of employer group life insurance policies.

Pros

•     Policies provided by your employer are usually free to the employee.
•     All employees are generally eligible, regardless of age or health. Typically, no medical exam is required
•     It’s simple and convenient.  Your employer has done the research and you don’t have to shop around for a policy.

Cons

•     Group life insurance policies typically do not cover your full lost earnings. While they are a good starting point, it is not enough for everyone.
•     Employers may offer additional coverage at a price. The rates you pay for additional coverage may not be as good as what you could find with a licensed agent.
•     Your policy is tied to your job. If you change jobs, you may lose coverage or have to pay a fee to keep it going. In an era when the average person changes jobs multiple times, this is an important consideration.
•     If you leave your job because of declining health, you may end up losing your job-related health insurance.

How to Choose Life Insurance

It’s great to have life insurance provided by your employer, especially if it’s a free benefit. However, do not assume that this is sufficient. Once you determine that

Type of Policy

There are several types of life insurance. The most common are:

•     Term — These policies are purchased for a fixed amount of time such as 10, 20, or 30 years. These are usually the least expensive.
•     Whole — This type of policy is valid for as long as you pay the premiums and does not have an expiration date.
•     Universal — A type of policy that lets you invest your money and earn interest.

When researching policies, make sure you are comparing the same type of policy, such as term with term.

How Much Coverage

These are some of the factors to help you determine how much coverage you need:

•     How many dependents you have. This may include aging parents as well as children.
•     The financial status of spouse and dependents. For example, does your spouse work or have a business?
•     College expenses.
•     Mortgage payments
•     Financial assets, savings, and debts.
•     Your age and health.
•     End of life expenses.

Choose the Right Company

It is important to choose an insurance company that is reputable and offers policies that are a good match for your needs. You can get independent verification of a company’s financial strength fromratings agenciessuch as A.M. Best, Fitch, and Moody’s.

Make an Informed Decision Based on Your Life Insurance Needs

If your employer provides life insurance, do not assume that this will be enough to protect your family. You need to look carefully at your financial situation and consider the needs of everyone who depends on you. Your group policy can be helpful as a backup but there are advantages to having your own policy that is not connected to your job.

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