Of all the people who own life insurance, half have a group life insurance policy through work, according to a 2017 study by the Life Insurance Marketing and Research Association.
In many cases, an employer might offer a certain amount of life insurance for free. For example, you may get coverage worth $25,000, $50,000 or even one or two times your annual salary. Because you don’t have to do or pay anything to get this coverage, it’s a no-brainer.
But if you’re thinking about purchasing group life insurance coverage beyond that, there are a few things to consider.
Pros of Getting Life Insurance Through Work
Group life insurance may be worth considering if you’re on a budget, have medical issues or don’t want to deal with the process of applying for life insurance.
Coverage Is Typically Cheap
Group life insurance rates are typically based on your age and whether you’re a smoker. For example, here’s a sampling of the monthly rates NEA Member Benefits offers for a $100,000 policy:
25 to 29
30 to 34
35 to 39
40 to 44
45 to 49
50 to 54
55 to 59
In some cases, these rates may beat what you can get by shopping around for an individual policy on your own.
You May Have an Easier Time Getting Approved
When you apply for an individual life insurance policy, you typically have to submit to a health exam, which may include a blood draw.
With a group policy, however, you typically skip the medical exam. This can be a huge benefit to people who have health issues or a history of health problems in their family. And since the monthly rates are set for the group, you don’t have to worry about paying higher rates for your medical condition.
It’s a Convenient Process
You don’t have to shop around with your group life insurance policy. You simply opt in once a year during your employer’s open enrollment process and choose how much coverage you want.
Plus, as we previously mentioned, you don’t need to deal with setting up a medical exam to apply. And when the policy goes into effect, your employer will deduct your premiums from your paycheck, so you don’t have to set up monthly payments on your own.
Cons of Getting Life Insurance Through Work
Despite the benefits of group life insurance, you might not want to put all your eggs in that basket. These policies typically aren’t portable, and you may be limited on how much coverage you can get.
Group Life Insurance Isn’t Always Portable
On average, employees stay with an employer for 4.2 years, according to the Bureau of Labor Statistics. So, whether or not you’re planning on sticking around for a while, it’s possible that you may be working for a different employer in a few years.
The problem is that group life insurance typically doesn’t follow you from employer to employer. Once you leave an employer, your coverage terminates.
That said, there are some life insurance companies that allow you to convert your group policy to an individual policy when you leave, or move it over to your new employer. So, double-check with your employer to see whether that’s a possibility.
You Might Not Get Enough Coverage
Depending on your employer and the insurance company it uses, your group life insurance coverage may be limited. They may choose a dollar limit like $500,000, a multiplier of your salary, say four or five times.
To know if that’s enough, find out how much life insurance you need and compare it with what your employer offers. If it’s not enough, look for an individual policy that can at least make up the difference.
Think Carefully Before Taking Supplemental Group Coverage
If your employer offers free life insurance coverage, take advantage of it. But beyond that, consider both the benefits and disadvantages of group life insurance before making a decision.
While coverage may be cheap, you can usually also get cheap coverage with a term life insurance policy if you’re young and healthy. Plus, you won’t have to worry about losing your coverage if you switch jobs.
But if you have health issues and can’t get cheap coverage with an individual policy, it might be worth taking advantage of the low rates through your employer.
To find rates for an individual policy so that you can compare, contact us. One of our licensed life insurance experts will reach out to you to discuss your needs and even offer a free quote.