I think it is amazing when a company offers group life insurance as part of their benefit package and if your company offers it, get as much as you can. There can be some shortcomings though if this is the only policy you have to protect your family.
For starters, most people have no idea how much life insurance they have from their employer. When they look an find out, they realize that they probably don’t have enough. Most employers offer 1-2x their annual salary. That’s great and all, but it is wildly short than what a family needs. What happens when that money runs out?
The other thing that people don’t consider, is that this group life insurance policy, isn’t theirs. It belongs to the employer. When you leave that employer, so does the insurance policy. Not only is that policy not enough, it’s not even yours.
According to the Bureau of Labor Statistics, the average tenure of an employee these days is 4.6 years. What if your next job doesn’t offer group life insurance?
As with health insurance, you don’t want gaps in your life insurance coverage, because you never know when you might need it. Most workers who get coverage through work don’t know where their life insurance will come from if they change jobs, are laid off, their employer goes out of business, or they switch from full-time to part-time status. You usually won’t be able to keep your policy in these scenarios. Lack of portability can be a problem if you aren’t going directly to another job with similar coverage and aren’t healthy enough to qualify for an individual policy. Some policies do allow you to convert your group policy to an individual one, but it will likely become much more expensive, as you’ll be converting your term policy to a costlier permanent policy. And if you’re losing your coverage because you were laid off, the premiums might be unaffordable.
Group life insurance plans should be secondary to a policy that you own. You can choose how much you actually need, or you can let a licensed professional help you figure that out. You can choose how long you want to have it, you can choose if you want term or permanent.
The last thing is, some people think they have life insurance plans through work, but they are flat out wrong. I have seen some people look at their policy only to realize they have an Accidental Death and dismemberment policy (AD&D). Or the policy dictates that it will cover them, but only if they die on the job.
Do yourself a favor and look at your policy you have at work. Find out how much you need. Use your employer’s policy as a secondary policy and protect your family properly.
Music by Roger Clyne and the Peacemakers
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