Whether you are a small business owner or work in a corporate role with a large company, it is important to consider your life insurance needs. There are many people who are going through life uninsured or underinsured. Do not put yourself and your family at risk by being ill-prepared.
I have partnered with Tania Robinson, FSCP, who is a Financial Planner with MassMutual, to provide my readers, followers, clients and potential clients with helpful information regarding insurance and investment / financial planning information that can guide you toward making the right decision for you and your family. September is Life Insurance Awareness month, and in this first article you will find valuable information from Tania regarding life insurance coverage and benefits.
Individual vs. Employer Life Insurance Comparison
Almost 70 percent of employees have access to life insurance through work, and 80 percent of those employees take advantage of this benefit, according to LIMRA, an insurance industry research organization based in Windsor, Connecticut. Half of U.S. workers have the option to purchase supplemental life insurance policies through their employer, and about 50 percent of this group buy it.1
If you only have a life insurance policy through work, however, you may not have nearly enough coverage. You also risk losing your insurance and paying higher premiums than you might need to. So you may want to consider an individual term life insurance policy even if you have access to life insurance through work.
Employer Life Insurance Benefits Aren’t Guaranteed
When someone else — the company you work for — is subsidizing your coverage, you have less control over it than you might want over something as important as life insurance.
Group plans can be changed, reduced, or dropped. The coverage often isn’t portable if you change jobs or get laid off. And these aren’t the only uncertainties that come with group coverage. For example, the cost of group coverage – the premiums you pay – is not guaranteed and the annual cost may increase over time.
Like health insurance, you don’t want to go without a life insurance policy for any period of time because you never know when you might need it.
You Might Not Get the Best Policy Rate
According to LIMRA, most people think life insurance costs more than it really does, some over estimate the cost by as much as double the actual premium.¹
Factors that affect your life insurance premiums include age, health, driving record, and credit history. If you’re in very good health, you may receive a preferred rate on an individual policy.
Group policies, by contrast, are not underwritten and do not exclude anyone, so they may be much more expensive. If you qualify as preferred or preferred plus, you may be able to buy an individual term life insurance policy that has several times the death benefit as your group coverage for the same annual cost.
If you have significant health issues, however — maybe you have diabetes or are a cancer survivor — a group policy may be your only option as Group policies offer coverage to those who may otherwise be uninsurable.
Benefits of a Group Life Insurance Policy May Be Limited
Many group policies offer small benefits of $25,000 to $100,000. Typical group life insurance coverage through a company offers a benefit of one times your salary, with the option to buy more. While that’s better than nothing, it might not be sufficient to protect your family.
Such a low death benefit won’t come close to replacing the income you would have likely earned over a full career.
While you may be able to purchase a limited amount of additional coverage that you pay for out of pocket beyond what your employer offers as a free benefit, for a total of three to four times your annual salary, total coverage still might not be nearly enough, especially if you are supporting a family.
If you’re single, however, or if you’re married but your spouse works too and you don’t have or plan to have kids, that benefit might be sufficient.
Speaking of spouses, if you insure your spouse through your employer’s life insurance, he or she may be underinsured, too. If your spouse stays home with the kids, for example, how much money would it take to pay someone to replace them as a caregiver until the kids are grown so you can continue to work?
Individual life insurance can be a great complement to or substitute for any life insurance you’re eligible for through work. It’s a bit more trouble to apply, since you’ll have to go through medical underwriting, but it’s the best way to make sure you have as much coverage as you need, to lock in your premiums, and to make sure you’re still covered even if you stop working for your current company
1¹LIMRA, “Facts from LIMRA: Life Insurance Awareness Month,” September 2015.
Provided by Tania K. Robinson, courtesy of Massachusetts Mutual Life Insurance Company (MassMutual)
© 2016 Massachusetts Mutual Life Insurance Company, Springfield, MA 01111-0001
For more information, please see https://www.massmutual.com/individuals/educational-articles/index2
FY1085 CRN201809-205036
To contact Tania:
Tania K. Robinson, FSCP
Financial Planner, Investment Adviser Representative
T: (404) 704-3944 | C: (678) 575-9101 | F: (404) 255-8314
https://advisors.massmutual.com/tania-k-robinson
MassMutual – Perimeter
4 Concourse Parkway NE Ste. 300 | Atlanta, GA 30328-5397
