The good news is more people now have employer-provided life insurance through their jobs than have individual policies. The bad news is that company coverage alone is probably not enough for your needs. So what can you do if you want more coverage?
According to a recent survey sponsored by the Life Insurance and Market Research Association (LIMRA), for the first time since 1960, there are more Americans who have life insurance through a company group policy (108 million) than own individual policies (102 million).
Sounds good, right? After all, getting life insurance as part of an employee benefit package is a great perk. Who wouldn’t want free life insurance?
Free life insurance is certainly nothing to sneeze at. But here’s the rub. The benefit amounts of many group employee life insurance plans are relatively small, typically $25,000 to $50,000. If you have a family to financially protect, that payout probably won’t be enough on its own to get the job done.
Think about it. Would $50,000 replace the rest of your life’s total income potential for your family? If I wrote you a check…right now…for the total death benefit for all the life insurance you possess, would you be willing to work the rest of your life for no pay? Would that final check be enough to keep your loved ones in the family home? Or pay off any outstanding debts? Or send your kids to college?
What if I do need more coverage? Can I buy more insurance through my company?
Some companies will give you the opportunity to purchase additional life insurance…on your dime. And I pointed out in a 2012 article on the subject in Kiplinger, many company group policies set their premiums in five-year age bands, so the rate you’ll pay will jump as you get older, and become exorbitantly expensive once you get into your late 40’s or early 50’s. The additional insurance probably won’t require you to take a medical exam, but again, policies that don’t require an exam are typically more expensive than individually obtained policies that do.
But what if I leave my job or get downsized…what happens to my life insurance?
Most companies’ group plans are NOT portable. That means when you leave your job, you usually lose the coverage.
What can I do to avoid this particular pitfall?
Frankly, if you’re young and healthy, you can probably get a better deal on additional life insurance if you purchase an individual life policy instead of simply adding to your group coverage. A 40-year old, non-smoking male, can buy a 20-year guaranteed level premium, term life policy for $500,000 for under $30 per month or about $350 a year. Depending on your age at issue time, terms are typically from 10 to 35 years.
But remember, term life insurance is only “temporary insurance.” If you want permanent life insurance that can’t be cancelled ever (as long as you keep your policy in force), there are plenty of options available. You’ll pay more in premiums (compared to a term life policy), but you will own life insurance that is a) guaranteed for life, b) has cash value that you can borrow against, and c) delivers a death benefit to your beneficiaries that is generally income tax-free.
How much coverage do I need to protect my family?
Some experts say, depending on your age, that you should buy coverage that equals 8 to 10 times your annual salary. But here at AccuQuote, we believe that every client is different, so we advocate a deeper dive to come up with a number that better suits your family’s precise needs.
This dive starts with asking yourself two key questions:
1. How much money will my family need to meet immediate financial obligations? This includes all your final expenses. (funeral expenses, burial costs, etc.) and lump-sum obligations (uncovered medical costs, estate-settlements costs, outstanding debt, mortgage payments, etc.).
2. How much income will my family need to continue living a comfortable lifestyle? This means calculating your family’s current day-to-day living expenses and future needs (groceries, utilities, child care, etc.).
Need some help? We have a life insurance needs calculator available that can help you get started. All you have to do is answer a few quick questions. It’s quick and easy. You may be surprised how much coverage your family would actually need to be fully protected after you’re gone.
If you’d rather talk to an experienced life insurance professional, one-on-one…talk to us. Since 1986, we’ve been helping people just you save money on their life insurance. Rest assured that we only represent the top-rated, brand-name insurance companies you know and trust.