Is Employer Life Insurance All I Need?

Is Employer Life Insurance All I Need?

October 16, 2019

Is employer Life Insurance all I need?  Will it be enough to take care of my family?   Am I paying too much for the coverage from my employer?  In many cases a healthy person 50 and under can save by switching from an employer provided plan.    Younger people can save even more with individual plans for decades since they will have even lower rates.

There are many companies pay for a portion or all of the life insurance for their employees, in most cases they allow the employee to purchase more than the standard coverage amount and even obtain coverage for their spouse at a low cost and with no medical exam.  So even with health problems you can get coverage.  THERE ARE SEVERAL PROBLEMS WITH OBTAINING LIFE INSURANCE THROUGH WORK!!

1.  Is My Employer Life Policy Enough Coverage?

Usually employer coverage is very inexpensive or free but the coverage amount may not be high enough.  If you passed how long would the benefits last?  Most advisers say your family needs at least five to to eight times your annual salary.  Some even recommend getting ten to fifteen times your annual salary.

Each situation is different, a person with a mortgage and a stay at home spouse with several children may need much more coverage.

Another issue is many employer policies only pay a death benefit replacing base salary and do not take in account bonuses, commissions, and other income.  Employer policies also usually do not have the additional coverage such as retirement contributions, return of premiums or disability riders that pay if you do not get hurt on the job.

Employer group policies for life insurance are great if you are single or have a spouse that is not dependent on your income.  But if that is the case you many not need any coverage.


2. What If Things Change With My Employment Situation

Most people do not think about what will happen with their Life Insurance Coverage if their employment situation changes.

Most employer Life Insurance does not move with the employee if they, move to another job, are laid off, retire or even if they are forced to become part time.

In some cases when an employee moves to a different employer they may not qualify for the new employers plan for months or if they have health issues my not qualify at all.

In other situations like employee retiring, getting laid off, or forced to become part time the policy may get so expensive that it is no longer affordable.   Generally trying to convert an employer policy that only works with One company is going to be more expensive than shopping the open market.

Shockingly some retirees find out later on in their retirement years that the policy they retired with is changed because of buyouts or mismanagement of pensions benefits.  Or worse that the coverage is lowered at certain ages and may even expire. Examples of these are 3M, Sears, and several other large companies cut benefits on their retired employees and while raising premiums on many.

If I Leave My Job For Health Reasons

Leaving your job because of health reason is hard enough.  Finding a new Life Insurance policy will become difficult at best.  What may be worse you will be losing your Life Insurance possibly when your family will need it most.  Which could force you into working longer and possibly adding to your health issues.

Not controlling who provides your insurance could force you to stay with an employer that you may want to leave but can’t.

If you have policies in place that you own it could benefit your negotiations as well as your ability to move employers if you ever saw fit.

If You Lose Your Spouse

Most employer benefit packages provide for your spouse but usually it is minimum coverage.  In most cases $100,000 is very common but that really doesn’t go far even if your spouse is not a breadwinner.

First how long will you need to take off of work.  A day, A week, in most cases PTO only covers a short amount of time.  Most people will go through an extended grieving period and if you need to take several months off your employer will probably not have an issue but I am sure they are not going to pay your normal salary.

Also what about all of those other thing that will be needed, suddenly day care, after school care, and so many other things that will need to be done day to day.  Sure family will help but will your sister or cousin be able to take your kids to school for the next 10 years?

Is My Employer Life Insurance Plan The Cheapest?

Well, it is the easiest but that doesn’t make it the best.  Many cases if you shop with someone like Bourgeois Insurance Agency, an Independent Agency, that can shop the market you can find a better rate the younger and healthier you are.

Also unlike some employer life insurance plans if you purchase a level premium plan your rates will never go up like most employer plans and cannot change if your employer decides to change their benefit packages.  And we know in today’s world employers are constantly finding ways to cut cost.  Usually at the expense of the employee’s benefit packages and retirees pensions.


What Should I Do?

First if your employer offer FREE or very inexpensive Life Insurance there is no reason you shouldn’t take it.

However it should not be your only source for Life Insurance because of the issues discussed earlier.  You should find Life Insurance that you own and cannot change as your employment situation changes.  Even if you are in bad health, there are many policies available that are affordable. Of course the younger and healthier you are the less the coverage will cost.  But most people are surprised when they apply how little it can cost.

You need to make sure your spouse will be able to cover your financial debts and support your children.  Mortgages, car loans, education, and living expenses are a few issues to discuss.

It is hard enough when dealing with the loss of a spouse, no one wants to add to that pain the added hardship of having to change schools, life plans or losing their home after their spouse passes


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