Shifting gears a little bit here. Most of this blog has been devoted to documenting my personal growth as I navigate the need to self-develop since becoming an entrepreneur.
But, I do not think that I have mentioned what exactly it is that I do. I work in finance and am actively working towards franchise ownership with one of the largest companies in the United States. My current licenses include life insurance in Michigan, Arizona, Ohio, and South Carolina. But I am working on obtaining several securities licenses which will give me the option to offer many more services to my clients and help my team achieve more of their personal goals. I loved school, and adore learning new things, so this is something that I am very excited about!
It occurs to me that there are many questions that people have in the realm of finances, I mean really, we were not taught these things in school. With that in mind, I am going to take some time on this platform to offer information that I have learned. If it is helpful to you, great! If not, I would definitely appreciate the share! Because I guarantee that you know someone who can benefit from the information shared below.
If I already have life insurance through my work, do I need a personal policy?
This is a question that I have been asked many times in my work since becoming a licensed life insurance producer. And the answer to the question is an unequivocal "yes".
As a part of many popular benefit packages, "life insurance" is offered. And usually, it is free or very low cost! To many employees, this sounds amazing. "I can offer my family something if I pass away, and I do not even have to think about it! My employer will handle it!" Well, that is how I thought about it personally. Then, I lost my job. Which of course means that I lost my employer-sponsored coverage.
The main reason why life insurance coverage is recommended to be purchased outside of an employer plan is that the employee does not own their group coverage.
In effect, an employer-sponsored life insurance coverage plan, AKA group insurance, is 100% at the discretion of the employer who owns it. The employee who is covered cannot make changes to it. So if there is a need for life insurance which this plan does not fill, the employee is in a take it or leave it situation.
Now, I always recommend that my clients take it. Especially if it is free. However, there are a variety of pitfalls to group coverage that can be overcome by purchasing a personal policy, which we will take a further look at.
Coverage is Dependant Upon Your Job
In most cases, if you have life insurance through work, you cannot take your insurance with you if you leave. So, if your employment is terminated, whether voluntarily or involuntarily, as soon as your employment ends, so does your insurance coverage.
* Note, a few companies offer portability, Meaning that you can bring your coverage with you - but this is often a much higher premium than you'd previously paid and those companies are few and far between.
If you own a personal life insurance policy in addition to the group coverage offered through work, it cannot be taken away from you as long as the policy premiums are paid.
Is the Amount Enough?
This is a question you must ask yourself. The purpose of life insurance is obviously, to leave something behind to our loved ones in the event of our death. But, how much are you planning to leave, and for what purpose?
Most group insurance policies offer 1x annual base salary, or some multiple thereof. I will use my previous coverage for comparison. When I worked for a national chain pharmacy as a technician, my employer-sponsored coverage was for one year of my base estimated salary which equaled out to $21,000.
A check at that amount would have been beneficial to my husband and children for sure, but for how long? With the average funeral cost being between $7,000 - $9,000, at least a third of that money would have gone to the funeral costs. But I, like most of my peers, have debt. The remainder would not have even paid off my student loan balance! And I suspect, that is the case for many other people in my situation.
Many people use life insurance for much more than paying a few debts and funeral expenses. Life insurance can be left to pay for children's college expenses, to leave a gift to loved ones or charities, or even to maintain the family's standard of living in the event that a major wage earner in the family dies. All of these things need to be considered when you are thinking of purchasing a policy in addition to your group coverage. What will you wish to leave for your loved ones?
That said, some employers offer an option to increase your coverage, with a supplemental plan. But these are also not controlled by the employee and may be changed or canceled by the employer at any given time without the input of the covered employee.
Group Life Insurance Does Not have A Living Benefit
A Living Benefit Rider is something that is offered in some life insurance policies. What these do is offer the covered individual an option to take some of their death benefit, and use it in the event of the diagnosis of a terminal illness.
These are often applied to paying long-term care medical bills, but in some cases, they can be used in other ways. They definitely come in handy for someone facing such a situation. Unfortunately, there are no group insurance policies that offer such coverage. But several personally owned policies do.
What is Covered with Group Life?
Likely one of the biggest pitfalls of group life insurance coverage is that it covers a very limited set of scenarios. Each plan is different, so to get the full information you would have to consult your employee benefits department, but these are common issues.
Often a person must die performing work duties, or on work property for their beneficiary to receive payment. Considering that most people only work 40 of the 168 hours in the week, we don't see too many deaths in the office. This is another consideration with purchasing coverage outside of work. In addition, group coverage often lapses when an employee is on leave or disability. So, if death occurs because of such a situation, the beneficiary may receive nothing.
Although natural deaths may be covered, we often find that people do not die of natural causes before retirement age. So, when someone has retired and lost their coverage, if they pass away, there will be no life insurance left to the family if no personal policy is owned.
The days of working for thirty years, and retiring with a pension and full benefits are out. Unfortunately, we must think for ourselves instead of relying on our employers to take care of us these days. And that is why we must take a hard look at our benefits packages, and see just what is in there and if it is what is right for our situation. Just look at what has happened in the last year as a result of Covid. How many people do you know that started a new job? How many people do you know worked through a global pandemic, not knowing if they would catch the disease on a daily basis?
All in all, if your employer offers free life insurance as a part of your benefits package, I recommend that you keep it. If it comes of use and costs you nothing, it can only benefit you. But I do absolutely recommend a life insurance plan that you own in addition to your group plan. Having something that you own is generally considered much safer than essentially renting your life insurance through your employer.
If you are not sure where to start, Reach out. I would be glad to be of help. I offer free quotes and consultations.
Myself and my husband Steve, who is my partner, can be reached at:
reclaimingmyselfblog@gmail.com
(989) 863-8391
or on Facebook
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