Your job already covers you in the event of an accident.
But is your employer life insurance policy enough?
Life insurance: it’s not fun to talk about, but it’s an important step.
A death within the family can create a crushing financial burden; life insurance can help provide financial security for your loved ones if something were to happen to you. In addition to providing guaranteed financial protection to compensate for income loss, it can also help cover medical expenses, living expenses, and debt.
Typically, it’s delivered in a lump sum, and the best part is it’s generally tax-free.
Many companies offer life insurance, but is it enough for the people you leave behind?
What Do You Need From Your Life Insurance?
The main question you should ask yourself is, “How would you like your life insurance policy to benefit you?”
Monetary Relief
After a household provider passes, it’s essential to compensate for that income so that your family can navigate through this trying time without having to worry about paying their living expenses.
As we mentioned before, there are many ways your surviving family members and dependents can put your life insurance payout to good use. One immediate relief would be from any funeral or burial costs, as these can quickly total tens of thousands of dollars.
Your family or estate can also use it to pay off any debt or loans, especially if you are cosigned with someone else. This includes mortgages, car payments, student debt, and credit cards.
Other uses could include an inheritance fund, preserving a business, or supplementing your spouse’s retirement. The most important thing is that your family is secure so they can focus on each other during such a difficult time.
Policy Considerations
There are a couple of factors to consider when investing in a life insurance policy.
- Your Income – Your policy should cover 6-10 times your annual salary. Another way to calculate is to multiply your annual salary by the number of years you have left before retirement. Either method should get you in the ballpark. You should also consider any debts, mortgages, and future education expenses.
- Your Age & Health – Insurance companies take age and health into consideration when assessing your premiums, which is why you might find that premiums are higher if you are older or have certain pre-existing conditions.
Everyone’s life is unique, with a diverse set of priorities. What you need from your life insurance policy differs from someone else.
So let’s break down some of the advantages and disadvantages of individual and employer life insurance.
Pros and Cons to Employer Life Insurance
The Pros
- It’s easy – If your job offers life insurance, it’s a done deal. You don’t have to worry about it or do your own research. All you have to do is sign up, and the premiums come out of your check.
- It’s guaranteed – With employer life insurance, your coverage is guaranteed. You don’t have to do any tests, and there’s no underwriting. If you’re worried about how your health would affect your premiums, this is a great way to circumvent it.
- It’s low cost or even free – Most of the time, life insurance through your employer is either completely free or at a very low cost. Again, this is a great way to secure a good policy if you’re worried about age or health issues.
The Cons
- It’s job-dependent – Employer life insurance is tied directly to your employment. If you leave that job, you can’t take the policy with you.
- It’s status-dependent – During your employment, you can either be in an “active” status (regularly on the job) or an “inactive status” (on leave). Most employer life insurance policies are dependent upon an “active” status. So, the company may not pay the premiums if you go on medical leave. This is especially critical if your health were to decline, as that may happen right when your family needs the policy the most.
- It may not be enough – Every person’s situation is different, but if you have a spouse and multiple dependents that rely on your income, the life insurance policy offered through your employer may not cover your family’s needs. It’s essential to do the math yourself and figure out how much your family would need in your absence.
Pros and Cons of Individual Life Insurance
The Pros
- It’s tied to you, not your employer – One significant benefit is that an individual life insurance policy isn’t employment-dependent. It’s a policy that will follow you throughout your life, regardless of occupation.
- It has options – Unlike employer life insurance, you can shop around for a policy that fits your specific needs (instead of the cookie-cutter policy that a company may provide).
- It could be cheaper – Since life insurance premiums are based on “risk” (assessed via underwriting), an individual policy could be a more affordable option for healthy individuals, as opposed to supplemental insurance through your employer.
The Cons
- It’s subject to underwriting – When getting an individual life insurance policy, you must submit surveys regarding your health. You could even have to submit medical tests for review. So your policy (coverage & premiums) will be based on your health, age, and other conditions. The good news? These are rarely invasive and can often be done in your home or office.
- It could be more expensive – If you have pre-existing conditions or are of a mature age, the premiums for an individual life insurance policy could be more costly than those of employer life insurance. Affordable life insurance options are usually readily available.
Is Employer Life Insurance Right For Me?
When deciding on your life insurance policy, make sure to take a good look at your circumstances:
- Do you have dependents (spouse, children, etc.)?
- How much debt do you have?
- If something were to happen to you, who in your life would be financially liable?
- What would that monetary responsibility look like for them?
All of these factors will play into your decision.
If you’re single, have no dependents, and are in little to no debt, then an employer life insurance policy may be enough for you.
Most employer-provided life insurance policies are sufficient to cover your funeral expenses, but not much else. You will also lose this coverage if you decide to change career paths and work for a different company in the future.
However, if you have a spouse, dependents, or debt that outweighs your assets (most people fall into this category), you should consider supplementing your employer life insurance with an individual policy.
An individual policy can be very affordable and—what’s more—provide wider coverage no matter where you work.
Conclusion
The good news is that life insurance isn’t as expensive as you think. So, supplementing your employer life insurance is very low-risk and cost-effective. But either way, life insurance is easy to acquire and affordable.
And when it offers peace of mind and security for the people you leave behind, it’s worth every penny.
If you’re feeling overwhelmed or confused about how much life insurance you have, how much you need, or just want to talk about your options, Harry Levine Insurance is here for you. We’ll help walk you through your options to lead you to a solution that’s right for you.
Contact us today or visit our website for a free quote.