When getting coverage, you may find employer-sponsored life insurance as part of your package of benefits when working for a particular company. Along with health insurance, life insurance provided by the employer is a rather common occurrence and, depending on the nature of the policy, can be a good or bad thing for the needs of you and your family. In this article, you will learn all you know about life insurance through an employer.
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There are certainly advantages to getting life insurance through an employer. In fact, the major benefit is that because all employees are contributing to the same fund, the overall cost will generally be much lower than if you purchase life insurance by yourself.
Another advantage is that because the company is working with the insurance company, you have very little to do other than sign a form and perhaps answer a few questions, as there is usually no health exam. This is generally because, with so many employees, the risk the insurance company is taking is minimized.
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Disadvantages of Life Insurance through Employer:
However, employer-provided life insurance is not for everyone, and there are issues that you may have with the policy that is provided.
Non-Portable: If you should lose your job, then you will lose your life insurance as well. This means that for those who find themselves unemployed, no coverage protects the family if something should happen. However, it must be noted that you may have the option to convert the life insurance from the group policy to an individual one, although that will significantly increase the cost.
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Unsuitable for your Needs: You may find that the group policy is unsuitable to cover the needs of the beneficiaries in case something happens to you. This is because many companies will get lower premium costs by having reduced benefits for those covered. Usually in these cases, you can get higher coverage, but that will cost an additional amount and may subject you to a medical examination.
Should I Stick with Employer-Sponsored Life Insurance?
This will depend on several factors that begin with the needs of your family or beneficiaries, your budget, and any special concerns that need to be addressed. Employer-provided life insurance offers many advantages, even if you have to add additional features to the policy. However, you will need to examine your current status to see if this is enough for what you want it to accomplish.
For the most part, young, healthy people may find that this form of group life insurance is enough for them, especially if they are not supporting a family. In fact, for anyone with no family to support and minimal debts, most employer-sponsored life insurance is going to be enough for their needs as long as it covers burial expenses and any debt they owe.
However, for those with families to support and large debts such as having a mortgage, you will want to examine just how far the company life insurance policy covers. You may find that calculating your debt and the financial impact on your family may far exceed the benefit coverage that your beneficiaries will receive. In this case, you will need to supplement the policy by purchasing additional coverage with the same company or by going outside and finding another policy to cover these particular needs.
This will be a difficult decision to make in large part because of the unknowns. Still, in the long run, you are better off getting the needed coverage if your budget can afford to take on another life insurance policy or augment your one with your employer. Plus, you must take into account what might happen if you should leave your job and not be covered for the time you are not employed.
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Is Depending on Employer-Provided Life Insurance Worth It?
Again, young, single individuals who are just starting in life and have very little debt will usually benefit from being under such a policy. There are exceptions, of course, depending on the income level and amount of debt incurred. Still, for the most part, people in this position usually benefit the most from employer-provided life insurance.
Another factor is the budget because if there is not enough money in your account to pay for an individual life insurance policy, then you will have to settle for the company one, at least for the time being. However, those who need better policies should start with the employer first to see if they can augment the benefits without taking too much away from the take-home pay.
When is Life Insurance through Employer Not the Right Choice?
Usually, employers require all employees to contribute, but that does not mean the employer’s life insurance on employees is the only policy you can have. You will definitely want your independent life insurance policy for the following reasons;
- Benefit coverage is insufficient
- Protection when leaving the company
- Better terms or premium payments
All in all, life insurance through employers can offer substantial benefits to those who cannot afford their policy. Plus, additions to the employer policy can often cost less than getting an independent plan.
However, when comes portability issues, that is the major drawback of employer life insurance. When you move to another company, get laid-off or fired means that your family is now without the financial protection that having a life insurance policy would offer at the worst possible time.
So, for those who are concerned about keeping a good life insurance policy if they should leave their employer, finding one on your own should be a top priority so that you can settle into the new policy and create peace of mind for yourself and your family in case the worst should happen.