Is your group life insurance enough?
Many employers offer group life insurance to their employees as an easy way to receive some life insurance coverage for free or at a very low cost. Although group life insurance is beneficial for many employees, does it offer enough coverage for you and your family?
Here are some reasons you should consider pairing your group life insurance with an individual life insurance policy to maximize your protection.
You’ll lose coverage if your job changes
Employer sponsored life insurance is tied to your employer and you will lose that coverage if your job situation changes. If you change jobs, retire, resign or are let go, you will no longer be insured through the group coverage. You may have the option to convert your group policy to an individual policy upon your leave, but this may be expensive. With individual life insurance, you will never have to worry about losing your insurance when changing jobs.
Your employer may not offer enough life insurance
Unlike individual life insurance policies that allow you to customize the benefit amount and term length to fit your situation, group life insurance is the same for everyone. The maximum life insurance offered through employers is typically a $250,000 benefit. While this amount may be enough for some people, it may not be enough for those with non-working spouses, a sizable mortgage, large families, or special needs dependents. It is recommended to have 10 to 15 times your annual salary to help relieve your spouse and children’s financial burdens if you experience a premature death.
Coverage for spouse and family
Group life insurance doesn’t typically cover your spouse, and if it does, the coverage may be minimal. Many couples assume that only the family’s primary money earner needs life insurance, but this is not the case. The death of a non-working or lower-income spouse can impact your income significantly. When one parent is absent, you may have to increase childcare expenses as you adjust to your new situation.
An individual policy makes sure you’re always covered. This includes helping your family with funeral expenses, debts, mortgages, tuitions, or even day-to-day expenses. If you choose an individual whole life insurance policy, it may include a “cash value” savings option. This allows you to borrow money against your policy or surrender the policy in exchange for cash. Unlike group life insurance, individual life insurance is relatively flexible and allows you to accommodate your family and lifestyle. You have the option to use term life insurance or whole life insurance. Term life insurance offers protection for typically 10, 20, or 30-year periods. Click here to learn more about an individual life insurance policy.
This blog is up to date as of January 2021 and has not been updated for changes in the law, administration or current events.
