We get many requests for life insurance quotes, often from people looking to supplement their coverage under a group life insurance policy, or looking to replace that coverage. Most employers that offer group life insurance pay for the coverage either up to the employee’s salary, or a multiple of that salary.
Additional coverage is sometimes offered for an additional cost to be paid by the employee. The cost for the additional coverage may be low for a younger person (in their 20’s, 30’s, or 40’s), but group coverage most often has premiums banded in 5 year intervals. For example, a given rate is charged for someone between ages 35-39, a higher rate for 40-44, and so on. Group life insurance also has some major limitations:
1. If you are in good health, you are being charged a higher rate than you may be able to get by purchasing your own individual life insurance policy.
2. Coverage is limited, usually to a multiple of your salary. Often this multiple does not adequately cover the total needs in the event of death. Someone making $75,000 per year may be able to get up to $300,000 of group life insurance, but may have a need for $1,000,000 or more.
3. If you leave the company, you lose the insurance. Any portion the employer pays as a benefit is usually eliminated.
4. If you leave the company and are offered the chance to convert and keep your coverage, it will be very, very expensive compared to buying your own policy on the individual market.
5. You don’t own the coverage. If your employer goes bankrupt, you may be left with nothing at the worst possible time.
6. The cost of insurance as you reach older ages on a group policy such as 55, 60, 65, and 70, becomes very expensive compared to the cost of buying your own life insurance policy. Ask your employer for a list of rates for current employees at those ages as well as retired employees that keep their coverage. The rates can be staggering.
When you purchase your own life insurance policy, you can lock in the benefit amount that YOU choose for the amount of time that YOU want. Your premiums are guaranteed never to increase for the period of time that you choose. Your total premium outlay over that time period will almost always be less expensive than group life insurance unless you are in very bad health.
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