17 Things You Need to Know About Employer-Provided Life Insurance

Fran
Fran Majidi
March 21, 2019

Chances are that if you have a full-time job, your employer offers you life insurance. Most people opt for it without thinking or comparing their options. If you look a little deeper into the numbers, however, you’ll see that you’re probably paying too much for the coverage. According to the National Association of Personal Financial Advisors, you can save up to 80% on your monthly premiums in the first year (and more after that) if you switch to an individual policy -- but only if you are young and healthy. The younger you are, in fact, the lower the rate and you can even lock yourself in that rate for years to come. It always pays to compare. If you have life insurance through your job and want to switch to an individual plan, visit here.

Unfortunately, things get more complicated the older you get. And life insurance becomes unaffordable if you have a medical condition. Sometimes, a work-offered group life insurance plan is all you can afford. If you want to learn some valuable facts about life insurance or if you want to know your other options, keep reading:

  1. Before you make a hasty decision, it’s a good idea to analyze the numbers. For instance, if your employer pays for a portion of your life insurance, check and see if you’re better off sticking with your company’s plan or switching to an individual plan.
  2. An employer is under no obligation to offer life insurance to employees. If your boss doesn’t mention one, ask about it but don’t expect to get it through your job.
  3. You need enough life insurance to cover credit card debts, mortgages, car loans, children’s education and more.
  4. Sometimes, an employer-provided life insurance policy offers coverage for spouses at a low price, without a medical exam. It’s important to note that a medical exam is rarely required for a work-provided life insurance coverage. This is beneficial to those with an existing condition.
  5. If you’re in good health and are a non-smoker, a standalone policy may be cheaper than the one offered through work. Overall, healthy individuals pay higher rates in a group plan than they would if they had a standalone policy.
  6. Most American families get their life insurance through an employer. With that said, most American families are underinsured when it comes to life insurance.
  7. If you lose your job or change jobs you’ll lose life insurance coverage. Some policies let you change your group life insurance policy to an individual one, but it will be much more expensive because you’ll be changing your term life policy to a permanent life policy. For some clients, this may be an expensive but necessary expense.
  8. Aside from the monthly premiums, which are deducted from your paycheck, sometimes, an employer-provided life insurance plan has little or no out-of-pocket costs.
  9. The life insurance policy you get through work may not offer enough life insurance. The work-provided life insurance usually matches the salary or doubles (sometimes triples) it in coverage (i.e If you make $50,000 your life insurance may provide $50,000 or $100,000 in coverage. You may need more than this if you die prematurely and have a spouse and children. Figure out how much coverage you’d need in the event of an untimely death. If you provided health insurance to your family through a work health plan, your family will now need to buy health insurance.
  10. The wisest solution is to take the work-offered insurance and buy supplemental life insurance to cover all circumstances.
  11. You can always buy supplemental coverage that is separate from your employer-provided life insurance. Remember that a death benefit usually doesn’t include bonuses and commissions. If the insured had a second job, that may also not be taken into consideration.
  12. A work-provided life insurance policy may be sufficient if you’re single, have no children or if your spouse has an income that can cover all expenses in the event of your death.
  13. If you leave your job due to a health condition, you will lose your life insurance and may not be able to find another affordable one, depending on the illness.
  14. If you have health problems but can still work, you may feel stuck in your job just to keep your life insurance in case you pass prematurely.
  15. If you have medical issues and do not qualify medically for life insurance, you can buy a “guaranteed issue” policy, which is an individual term policy that doesn’t require medical underwriting. Warning: this is much more expensive than what you’d get with a term policy.
  16. Sometimes, a plan doesn’t extend enough coverage over to a spouse. A commonly offered amount is $100,000.
  17. It’s a good idea to get multiple free quotes for supplemental life insurance if you decide to buy it through your employer. You’ll likely find a better rate and can pay the same premiums every year that you have the policy, whereas graduated increases associated with most employer provided policies.
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