Many companies offer a benefits package that includes life insurance coverage. Everyone who can get life insurance at work should definitely take it, as there are many advantages to company-funded group life insurance. There are also several disadvantages to group life insurance. Here we outline several advantages and disadvantages to group life insurance.
Advantages to Group Life Insurance
1. Easy qualification. Enrollment into group life insurance is automatic. Everyone qualifies and there is no medical exam required. People who have preexisting health conditions, like asthma, diabetes, or heart problems, can get life insurance at work. The rate might even be better than what an individual life insurance policy might cost.
2. Convenience. It's very easy to subscribe to an employer's life insurance plan without any effort on your part. If a payment is required, it is easily deducted from your paycheck.
3. Lower costs. Employers' insurance plans tend to be paid for or subsidized by the company, giving you life insurance at a low or perhaps free. You may even have the option to buy additional coverage at low rates. Costs tend to be lower for many people because with group plans, the cost per individual goes down as the plan enlarges.
These are all good advantages, but they aren't the only considerations that matter when it comes to life insurance.
Life insurance should serve its primary purpose of leaving money behind to your loved ones in the event of your death. With group life, the death benefit amount is often small. It can be a default amount such as $25,000 or $50,000 or may set around two to three times your annual salary. For example, if your salary is $50,000, your group life insurance may only provide about $100,000 to $150,000. If you have a mortgage and three children, this amount is not going to be nearly enough. What would they do once that ran out?
Disadvantages to Group Life Insurance
1. If your job situation changes, you will lose coverage. Whether you are laid off, moving from full-time to part-time, or leaving the job, an employee can't retain their policy when they leave their job.
2. Coverage may end when your retire or reach a specific age. Many people tend to lose their coverage when they continue working past a specified age or when they retire.
3. Your employer can change or terminate the coverage. The contract is between the employer and the life insurance company. This can be done without your consent.
4. You don't own the insurance policy. The employer own the policy and can modify or terminate the policy as they see fit.
5. Your options are limited. The policy is not tailored to your needs, such as adding a child rider or disability waiver. You many not be able to buy as much coverage as you need.
Why You Should Buy a Separate Life Insurance Policy
We will foremost state that if your company offers group life insurance, you should absolutely take it. It has a lot of advantages. Most likely though you will need to supplement that death benefit with a personal life insurance policy that is tailored to your specific needs. Regardless of your employer or employment status, a separate life insurance policy will remain in place as long as you pay the premium.
Most importantly, an individual insurance policy will fit the purpose for which you purchase it - to ensure your family continues to have the financial means to keep the home and lifestyle in the unfortunate event that you are no longer there.
Related blogs about life insurance
Three ways to get in touch with us to discuss buying life insurance today!