Is employer based life coverage enough? Why not?
Roughly 50% of adult Americans carry life insurance according to policy genius .
Of those 50% nearly half of them carry only a group coverage provided to them for low cost or free through their employer. Unfortunately life insurance is not an all or nothing game. While certain downfalls are more obvious than others when it comes to this kind of coverage such as only having it as long as you are currently employed by the company you presently work for, there are other bigger and less nuanced downfalls to employer based coverages like that in nearly all situations it is not enough coverage to actually cover your loved ones should the worst happen.
Life insurance is not a one shoe fits all kinda coverage, why people carry varies from person to person. However most commonly you can assume that the first reason someone carries a life policy is to act as income replacement if they are suddenly no longer available to provide for their loved ones. The general rule of thumb when it comes to income replacement is that your policy should cover 10-15 times your annual income. While initially you may think that directly translates to covering your loved ones expenses for 10-15 years that in fact isn’t the whole truth. Post life expenses are different for each person but they one thing they have in common is more often than not they are very expensive. Between burial and ceremonial costs, debt payments, the mortgage on any properties that are not paid off and more are costs that will be deducted almost immediately and can add up to staggering amounts rather quickly. Another thing to add here is that most employer based policies reach their death benefit amount by simply taking your annual income from that job and multiplying it by a certain amount of years. What this doesn’t take into account is additional revenue streams such as bonus’s you would be paid in the future, commissions that you would potentially be paid throughout the rest of your employment future, second incomes that you may have and additional benefits that you may bring to the table for your family such as health insurance and retirement contributions. While this may seem like a lot to think about at this moment, these are the choices that you would make in the future to secure your families financial well being and ensuring you have adequate life coverage as early as possible is your way of insuring that if you are not able to be there to offer these things that your family still has the security that comes along with them.
While the amount of coverage is certainly very important there is a second thing to consider that may be even more important and that is how long will the coverage be available and how often will it change. Some positions within the same company are paid different ways, lots of hourly employees jobs come with benefits however when they take a promotion to a management position they may loose some of the benefits that came with that position. This could mean your life insurance coverage. Additionally if you leave your current employer whom you have had a life policy through, you new employer offers your a life policy on the assumption that you are currently healthy enough to have it written. If for some reason your no longer eligible for coverage according to your new policies underwriters then you will not have life coverage in your new position. Lastly in our current business environment companies are always looking for ways to streamline and cut costs. The writing is on the wall with that one, when companies begin to cut costs often times one of the very firsts things to go will be employee provided life benefits. This is why it always pays to consider additional coverage to your employer based policy at a young age, to save money and ensure that if that employer based coverage ever lapses your life coverage is still in place.
Lastly, a brief point. Many times employer based life insurance is not your most cost efficient option. Just like any other financial decision you should always do your own due diligence. While most times employers will subsidize your life coverage which helps with the costs, in situations where they do not it is often times not your cheapest option. This essentially means the only benefit they offer is to be able to take your payment directly from your pay before you get it. However in this day and age of online and electronic bill pay we and most other insurers can set up an auto payment plan with you that basically does the same thing, and possibly for less annually!
The point here is not to discredit employer based life coverage, quite the opposite in fact. Employer based coverage is great and additionally its existence helps lend credence to the absolute necessity of life coverage. What we are saying is that its always important to know exactly what your current coverage is, what its strengths are and where it lacks. That way you can find a supplemental coverage that is tailored to fit you and your families needs specifically so you can insure that the future you want for them is as guaranteed as you can make it! If you have questions about your current employer based life coverage or questions about getting a supplemental or brand new life policy started let us know here!!