Is Life Insurance Through Work Enough?
– Why You May Need To Own A Separate Life Insurance Policy
You landed an exciting dream job offer with a host of benefits; annual paid one-month vacation, free lunch, transport services to and from transport services, and health insurance. Oh, one more thing; your employer also offers group life insurance. Life insurance comes at little cost. You are overly excited about this lifetime offer, and you can immediately tell that it will be your long-time comfort zone.
The offer of group insurance sounds good, especially if your employer is paying for it. However, it is worth asking; is the group life insurance that your employer offers worth it? Or is group insurance a worthy idea? The following information offers you insights into why group life insurance is not enough and why you may need individual life insurance coverage.
What Does Group Insurance Mean?
Most established employers allow their employees to enjoy life insurance as their employment benefits. The life insurance policies your employer offers are also called basic group life. A 2017 Life Insurance Marketing and Research Association shows that more Americans are covered by group life insurance than individual plans.
Workers are often convinced that the group life insurance provided by the employee is enough. Sometimes, the compensation amount may be equivalent to your two-year salary. For instance, let's say your annual salary is $50,000, and your employee puts the life insurance at $100,000.
The amount may seem substantial, but it is worth asking how long it will sustain your family in meeting their expenses. How long could the $100,000 take care of the following family needs if you were a breadwinner?
· Rent payments or mortgage
· Private student debts or loans
· Healthcare expenses
· Utilities and daily living costs
· Childcare expenses
Your employer's basic provided life insurance may be free or come at a low cost. However, it would be best if you consider its effectiveness in meeting your family's financial needs in your absence. Here are some of the reasons you need to supplement group insurance with an individual life policy cover.
Your Employer’s Insurance is Not Enough
One of the prominent problems associated with group life insurance is that it can never be enough. The example outlined above already explains why the policy isn't sustainable. Two years' annual salary can't sustain your family for long, especially if you leave a young family that depends on you.
It is recommended that you go for supplemental coverage of at least six times your annual salary if you have dependents looking up to your income. Some life insurance experts recommend that it is even better to go for a cover with up to 10 times your annual salary.
It is worth noting that multiplying your annual income cannot replace your actual income because death benefits do not include second incomes, commissions, bonuses, and other valued additional benefits.
The employer-provided life insurance can only be sufficient if your spouse has an alternative income source. It can also be enough if you are a single person with minimal debts.
Losing Your Job Means Losing Your Coverage
Another problem with employer life insurance is that it is prone to insurance gaps if your job position changes. Losing your job means the employer will no longer cover your insurance until you find a new employer.
You don't want such gaps in your life insurance policy because misfortunes hit when least expected. The group insurance's lack of portability increases the essence of taking an individual life insurance coverage policy to shield you from such situations.
Some group insurance policies can let you change into individual coverage. However, it may be more costly depending on your former employer's terms with your insurance firm.
Sometimes your employer for some reason, may stop offering the group life insurance even if you do not lose your job. Such changes are likely to leave you without life insurance coverage, especially if you never saw it coming. You must take individual life insurance coverage to cushion yourself from such situations.
A Decline in Health Affects our Policy Cover
A health problem may arise and force you to leave your job. You face the risk of losing your cover if you suffer from a medical condition that may prompt you to stop working. If you depend entirely on your employer's group life insurance coverage, the problem becomes worse.
It is sad losing your policy at a time when your loved ones need it most. It may be too late to go for an affordable individual life insurance policy once you lose your employer-provided coverage because of declining health.
You will be forced to work amid your declining health to keep the life insurance active. Why wait for such trouble when you can take an individual life insurance policy? It would have been a different case if you had taken individual life insurance coverage sooner.
Your Employer-provided Life Insurance Is Not Always The Cheapest Alternative
It's worth noting that a good group life insurance takes your spouse's needs into thought, especially if you are paying for it. Take your time to shop around to determine if your employer's insurance provider offers the best solution for you.
Remember, the greatest benefit of shopping for a life insurance provider when you are young and healthy is that you are more likely to find better alternatives. Most employers offer cheap coverage for individuals below 35 years and increase the price as individuals advance in age. Purchasing an individual life insurance policy is likely to be cheaper if you are healthy and don't smoke.
Let's revisit our question? Is life insurance through work enough? The above reasons show that employer-provided group insurance is not enough. You need to supplement it with an individual stand-alone policy. Check your family's needs. The more dependents you have, the higher the life insurance you need. Taking separate life insurance will ensure consistency even when your work status changes besides cementing your legacy in your loved ones' life.