I Have Life Insurance Through My Employer. Why Do I Need Another Policy?

One of the perks of having a full-time job with a good company is the benefits package that comes with it. Often, those benefits include life insurance coverage, which is great. And everyone who can get life insurance at work should definitely take it, as there are many advantages to company-funded life insurance, also known as group life insurance. These advantages include:

1. Easy qualification. Often, enrollment into group life insurance is automatic. That means everyone qualifies, as there is no medical exam required. So people who have preexisting health conditions, like diabetes or previous heart attack, can get life insurance at work, and may get a better rate compared with what an individual life insurance policy might cost them.

2. Lower costs. Employers’ insurance plans tend to be paid for or subsidized by the company, giving you life insurance at a low cost or even 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.

3. Convenience. It’s easy to subscribe to an employer’s life insurance plan without much effort on your part and if a payment is required, it’s easily deducted from your paycheck in much the same way as your medical costs are deducted.

These are all great advantages, but are these the only considerations that matter when it comes to life insurance? The answer, of course, is no.

Life insurance should first and foremost fit the purpose—it should meet your needs.

Life insurance should first and foremost fit the purpose—it should meet your needs. And the primary purpose of life insurance is to care for those left behind in the event of your death. With group life insurance, it’s often set at one or two times your annual salary, or a default amount such as $25,000 or $50,000. While this sounds like a lot of money, just think of how long that would last your loved ones. What would they do once that ran out?

There are several other disadvantages to relying on group insurance alone:

1. If your job situation changes, you’ll lose your coverage. Whether the change results from being laid off, moving from full-time to part-time status or leaving the job, in most cases, an employee can’t retain their policy when they leave their job.

2. Coverage may end when you retire or reach a specific age. Many people tend to lose their insurance coverage when they continue working past a specified age or when they retire. This means losing your insurance when you need it most.

3. Your employer can change or terminate the coverage. And that can be without your consent, since the contract is between your employer and the insurer.

4. Your options are limited. This type of coverage is not tailored to your specific needs. Furthermore, you may not be able to buy as much coverage as you need, leaving you exposed.

Importance of Buying a Separate Life Insurance Policy
It’s for these reasons you should get an individual life insurance policy that you personally own, in addition to any group life insurance you have. Individual life insurance plans offer superior benefits, and regardless of your employer or employment status, they remain in place and can be tailored to meet your needs and circumstances.

Most importantly, an individual life insurance policy will fit the purpose for which you purchase it—to ensure your dependents continue to have the financial means to keep their home and lifestyle in the unfortunate event that you’re no longer there to care for them.

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  1. This is a really good article. There are some exceptions to the rule for employer group plan restrictions depending on the carrier used by the employer. We offer group life plans that do not end upon termination of employment. You can contact us for more information at http://www.obeya.us.

  2. 99.9% of the folks I talk to that have “life insurance at work”, have no idea for how much, who the carrier is, how much they pay for it, what it does and does not cover, and basically no idea what they pay for on a weekly or monthly basis. Its almost as if life insurance has been “checked off the list” of things they are aware of that they need. “Already taken care of at work”. These are the same people I speak with ages 55-70 that end up having to buy a “final expense” policy from me when they realize the insurance they had at “work”, mysteriously vanished into thin air. Very few people actually leave work with real life insurance with any cash value. From the thousands of people i have spoken with about this exact situation, i have no choice but to draw this conclusion. Generally speaking, people are very uneducated when it comes to life insurance. Don’t get me wrong, I love selling and working with folks on final expense policies, but i’d much rather be helping them with their medicare plans at that age because we already have real permanent coverage in place from working with them for 20-30 plus years throughout the changes that life brings with appropriate life insurance products for their specific needs. I love helping people with life insurance at any age and having a positive impact on their financial well being with great strategies.

    1. If you’ve been working with them for 20-30 years, then there would be zero need for life insurance because they would be self insured and have $10,000 in savings to pay for a buriel.

  3. There is NO substitute for a personally designed and maintained estate plan. Only you are in tune with your family’s specific needs. While coverage “given” as an employee benefit is a great “perk” … control rests with the employer not you. People become uninsurable every day. Thank the boss, then Design and control your own program BEFORE you cannot.

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