Picture this.
You land an exciting new job with great benefits: vacation time, health insurance, 401(k)… even free lunch once a week!
Hopefully, it’s street tacos.
They offer group life insurance, too. What a deal. If like most companies it is two times your annual salary, maybe even four times your annual salary because you are just that awesome! That sounds like a lot, right? In many cases, it might not stretch as far as you think.
Let’s say you make $50,000 per year. A benefit of $100,000 can make a big difference to your family – for a while. But through the years, could it really go the distance to pay for expenses and reflect the legacy you want to leave for your family? Think about how far $100,000 or even $200,000 could go to pay for these common needs over time:
- Mortgage or rent payments
- Private student loan debt
- New job training to replace the income lost by your death
- Therapy from grief counseling for partner/spouse/kids
- Unexpected funeral cost
- Utilities, groceries and other costs of living
- Healthcare
- Childcare expenses
- Charitable giving
When you rely exclusively on group coverage through work, you miss the opportunity to personalize your coverage based on your specific needs.
Here’s why that matters.
Life insurance by its very nature is a deeply personal financial decision based off your age and health. You don’t buy clothing that is one size fits all, so why would you leave it the new companies HR department?
7 Reasons to Consider Getting Your Own Life Insurance Policy
- If your job situation changes, you may not be able to maintain the same coverage. Whether that means being laid off, moving from full-time to part-time or leaving the company… in many cases, an employee can’t retain their policy when circumstances change. When this article was written on April 3, 2023 there were over 166,004 layoffs in the tech sector alone.
- It may not actually be life insurance. Some companies offer an accidental policy that covers you in the event of death from an accident. This is certainly better than nothing but it is generally better to cover as many scenarios as possible. Some scenarios pay out only if you die in connection to your job.
- The majority of these policies only benefit if you die. Death benefits are great and should be part of your long term smart future planning. Yet, you are more likely to face a health issue well before death and your healthcare coverage probably is not going to be enough coverage. What good is a death benefit if you have a heart attack, stroke, or cancer and survive? Not much. If you do have such an event and you don’t already have external coverage, it is going to likely be much more expensive, have less coverage, and probably have a waiting period.
- Coverage may end when you retire or reach a specific age. Many people tend to lose their insurance coverage when they continue working past a specified age or when they retire. This could mean losing your insurance when you need it most. If you have a health change then you may no longer qualify.
- It’s a benefit… not a guarantee. Your employer can change or stop offering life insurance coverage without your consent, since the contract is between your employer and the insurer. With many employers in cost-cutting mode, employee benefits might (unfortunately) be among the first things on the chopping block. Better plans offer more coverage during working years and are convertible to whole life near or at retirement.
- Your options are limited. This type of coverage is not tailored to your specific financial needs. Furthermore, your employer might not offer the option for you to purchase extra coverage as you need, leaving you exposed.
- These policies generally do not include any coverage for your family. Unlike many independent policies, work policies generally do not offer any benefits to your family. Better policies also pay benefits to your children under 18 if you die while they are minors on top of the death benefits.
Individual life insurance plans can offer superior benefits, and regardless of your employer or employment status, you can tailor them to meet your individual needs and circumstances. Read the full article on the Life Happens blog.
*Life Happens does not endorse any product, company or insurance adviser.
