Your employer’s benefit package includes life insurance. Congratulations! But is it enough?
There are certainly advantages in having your employer pay for part of all of your company insurance policy. It comes out of your paycheck, so you don’t have to worry about being late with a premium. You can even get coverage with less than perfect health. And you may even get coverage for your spouse with no medical exam either. There is nothing wrong with that, but let’s look at some of the issues involved.
While basic employer-provided life insurance may be low-cost or free, the face value still may not be high enough. If your premature death would be a financial burden to your spouse, children, or loved ones, financial planners recommend you should have coverage worth five to eight times your annual salary. Some experts recommend even more, especially for employees with non-working spouses, a sizable mortgage, large families or special needs dependents. And consider this, death benefits that replace one year of annual salary do not take into account bonuses, commissions, second incomes and the value of additional benefits such as medical insurance and retirement contributions.
And here’s something else to consider, if you change jobs, are laid off, your employer goes out of business, or you switch from full-time to part-time status, where will your insurance coverage come from then? Granted, some policies will allow you to convert your group policy to an individual one, but it will most likely become much more expensive, because you’ll be converting your term policy to a costlier permanent policy. Of course, if you’re losing your coverage because you were laid off, the premiums might be unaffordable altogether.
Another issue arises if you’re forced to leave your job because of a health problem. If you rely solely upon group insurance, and then suffer a medical condition that forces you to leave your job, you could be losing your life insurance coverage just when your family is going to need it the most. And depending on the medical condition, you might not be able to replace your coverage at any cost at that point.
While there’s no reason not to take advantage of any free or inexpensive insurance your employer offers, it shouldn’t be your only source of life insurance. The solution to each of these problems is to purchase some or all of your life insurance directly through an individual term policy. You might need to purchase as much as 80% of your life insurance on your own, both to have enough and to be sure you’re covered at all times and under all circumstances.
Contact the folks at Freedom Insurance for a comprehensive look at your insurance coverage to see if it will do what you want it to do.