Many employers offer basic life insurance coverage up to one year’s salary for no cost to their employees and allow employees to purchase additional coverage. This type of company-sponsored life insurance is called “group life insurance”. This is a great benefit and at the minimum, workers should accept the basic coverage provided by their employer. There are several benefits of group life insurance including:
- GUARANTEED COVERAGE: For most employees, the basic coverage provided by the employer is an automatic enrollment for all employees. This means all eligible employees receive the no-cost insurance the moment they are hired and/or successfully pass their probationary period of employment. In addition, no medical exam is required to receive the basic coverage, and in some cases, a medical exam is not needed for additional coverage that is purchased by the employee through the group life insurance.
- AFFORDABLE RATES: Group life insurance is either paid for or subsidized by the employer. This is one of the biggest perks for group life insurance. These low rates allow employees to purchase additional coverage when they may not be able to afford it outside of the workplace.
Although these are great perks of group life insurance, the most important thing you should ask yourself when enrolling is “Will this be enough?”. This is where the downside of group life insurance comes to light and you should consider purchasing outside life insurance.
- NOT ENOUGH COVERAGE: Most group life insurance plans have a maximum amount of coverage that can be purchased which is typically up to five times your salary. Depending on your annual salary, even if you purchase the maximum additional coverage, your coverage amount may not cover the costs of your debts, funeral costs, and providing financial comfort for your dependents.
- COVERAGE EXPIRES: Group life insurance is typically term life insurance provided at a group rate. This means that when you reach a certain age, usually close to retirement age, you no longer qualify for the life insurance coverage. So, when you are likely to need it most, you may no longer have it.
- COVERAGE COULD BE TERMINATED: Because the group life insurance provided is a contractual agreement between your employer and the insurance company, you employer can choose to terminate the coverage or choose to not renew the contract with the insurance company, leaving you without any coverage without a say in the matter.
Individual life insurance policies can be purchased as a way to supplement your employer coverage or it can be purchased instead of your employer sponsored life insurance. Individual life insurance also comes with its own set of benefits.
- They can be completely customized to suit your personal needs. You can select your desired coverage level based on what you believe your family will need to continue their lifestyle and not struggle financially without you or you can select the coverage level based on your budget.
- Contrary to what many may believe, individual life insurance plans are highly affordable and many people are able to purchase a plan in addition to their company sponsored coverage.
- You can select a permanent life insurance plan; one that will not terminate or reduce in coverage level when you reach retirement age.
- There are also options that accrue cash value – there are far more options for individual life insurance than group life insurance.