4 Reasons to Have Your Own Life Insurance, Even if it’s Already an Employee Benefit

Finances

If you work for a company that offers life insurance through a group policy, you may be surprised to find out that there are good reasons to consider getting additional coverage.

Before discussing why you may need additional coverage it’s really important to understand why you need coverage at all. The purpose of life insurance is to protect people who depend on you financially when you die. With adequate coverage, when you die, you can be sure that the people who depend on you have enough money.

According to LIMRA, more than 70 million people know and admit they need more life insurance in the United States. Yet, they aren’t making it a priority.

The scariest part about this is that you jeopardize the financial lives of the people you love the most when you have inadequate coverage.

Consider life insurance planning as part of your overall financial plan and make it a priority. This includes know the reasons why your employer coverage may not be the only coverage you need.

Reason 1: Your Employer’s Coverage May Be Inadequate

Your group life insurance coverage may not provide a large enough death benefits for your dependents when you die.

For example, if your coverage pays out a $50,000 death benefit, and your family would need $1,000,000 to live off without you, then your employer plan would be inadequate and you would need additional coverage.

Understanding how much insurance you need is crucial to knowing how much additional coverage to purchase. There are several approaches to determining how much life insurance you need, so it’s important to talk with a professional to know what’s best for you given your specific family circumstances. Some professionals use an old school model where the rule of “10 times your income” is how much life insurance you should have. Beyond general rules that you can find online, a professional will be able to tell you how much life insurance you need, given your specific circumstances.

Your coverage may fall short in other areas in addition to the death benefit, too. For example, you may want riders on your life insurance plan that you can’t add with an employer plan.

The customization of an employer plan is limited compared to life insurance you can buy on the open market. For this reason, you may find your life insurance coverage through your employer inadequate.

Reason 2: You May be Able to Get a Better Deal Somewhere Else

Your employer provided life insurance coverage may not the best financial decision for you. You may be able to find a better deal by shopping for life insurance through an insurance broker. Not only can you price shop, but you can shop for insurance that fits your needs.

Shopping for a good deal on life insurance now is important. If you wait until you switch jobs, you are giving up time that could work in your favor. For example, if you change jobs in five years, you will likely pay a higher rate for life insurance (assuming you’re in the same health, which is also a risk) than if you got the life insurance policy earlier. Locking in a price now will help you get the best deal you can, regardless of your job status.

Reason 3: Your Insurance is Dependent on Your Job

With employer group life insurance, the coverage only exists so long as you are an employee. If you quit, are laid of, or are fired, you most likely lose your life insurance coverage.

The average employee works at his job for 4.6 years according to the Bureau of Labor Statistics. This means that most people are changing jobs a lot. With each job change, benefits end – life insurance coverage included.

While you may think you can always get life insurance with your next employer, your next employer may not offer life insurance or some other turn of events may happen in your life where you don’t have access to employer life insurance coverage.

Reason 4: If Your Health Changes You Put Your Coverage at Risk

If you get sick or become disabled you put your life insurance coverage at risk. Getting an illness may cause you to have to leave your job, which means you may lose your benefits, including your life insurance coverage. In this case, as opposed to quitting or being fired, your ability to get life insurance somewhere else may be very difficult because it’s hard to get life insurance (if not impossible) in poor health. Life insurance is easiest and cheapest to get the younger and healthier you are.

For example, if you are the sole provider for your family, become disabled, have to leave your job, and die a few years later, you would leave your family without life insurance money after you passed away if you only had employer life insurance coverage because of the years where you lived disabled and unemployed. If you had additional life insurance coverage in place before you became disabled, your loved ones would receive a death benefit regardless of whether you worked in the last years of your life. This is a really important reason to consider shopping for life insurance above and beyond your employer group coverage.

Shopping Young Makes Sense

Life insurance is easiest and cheapest to obtain when you are your youngest and healthiest self. Therefore, it’s really important that you consider your health and your age when you decide how to meet your life insurance needs.

You need life insurance if you have people who would financially suffer if you died. The purpose of life insurance is to protect your loved ones financially when you’re no longer here. With adequate life insurance coverage you can have confidence that the people who depend on you will have enough money to live without your support.

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