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Group Life Insurance vs. Private Insurance - Here Are 5 Things Your Missing

Group Life Insurance vs. Private Insurance - Here Are 5 Things Your Missing

September 16, 2021
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Free life insurance from your employer is a sweet deal. The employer pays for the coverage, and all you have to do is sign up during open enrollment for employee benefits. You might have to pay a small amount from each paycheck, but it’s usually only a couple of dollars.

While you’re looking into the option I would suggest you ask – Is the life policy you’re getting through your employer enough to take care of your family? And are you paying too much for that coverage?

Life insurance is a popular benefit for employers to offer. According to the Bureau of Labor Statistics (BLS), in 2019 60% of non-government workers had access to employer-provided life insurance. A life policy isn’t as common a benefit as health insurance, so offering it can help draw talent to a company and improve the employer-employee relationship.

The truth is these group policies are often easier to qualify for than individual life policies, but there are some drawbacks to these types of policies.

Here are 5 Reasons Not to Rely On Employer-Provided Life Insurance:

Your Policy Ends When Your Job Does
Employer-provided life policy normally does not transfer with you when you leave your job. You can’t take it with you when you go, and there’s no guarantee that your next employer will offer life insurance.

Health Changes Can Leave You Uninsurable
If you’re in the best rating class at 25, there’s no guarantee that you’re going to be in the best rating class at 35. It’s not only because you will be older, but you may also be less healthy

Additional Employer-Provided Coverage May Be Over-Priced
Often you have the option of buying additional coverage from the employer at your own cost. Also, if you are leaving your employer, you may be given a chance to convert the coverage to an individual policy. This optional insurance may be very expensive, particularly if you’re young because it’s priced on a guaranteed issue basis — everybody who works at an organization is covered, regardless of their health.

It’s Often Not Enough Coverage
The coverage provided by employer group life insurance is normally only a small multiple of your salary, maybe one or two times, and increasing coverage can be costly.

There Are No “Living Benefits”
Most employer-provided group life policies are typically bare-bones term insurance. Group term insurance only provides a death benefit. Permanent insurance provides a death benefit and offers additional benefits for you and your loved ones.

While there’s no reason not to take advantage of any free option your employer offers, it probably should not be your only source of life insurance. The solution to each of the problems described above is to purchase some or all of your life insurance directly through a licensed agent.

A great place to start when determining how much life insurance you might is with a basic life insurance calculator. Remember, there are multiple ways to structure life insurance to get you the protection you need. Don't hesitate to contact us to schedule your no obligation consultation. 

The information contained in this article is general in nature, provided for educational purposes only and is not legal, tax or financial advice. For information regarding your particular situation, contact an attorney, tax professional and financial advisor. Investing involves risk, including loss of value. Insurance and other financial products and services may be subject to certain terms, conditions and costs not identified within the enclosed material. Any strategies represented are not guarantees of future performance or success, and may not be appropriate for your situation. Please consult your CPA or other tax professional before moving forward with any financial products. Also, do not post any information you do not wish to be shared with others. If you have a matter requiring immediate attention, contact me at mclark@protectionpointadvisors.com.

Advisory services offered through EWG Elevate, Inc. dba Protection Point Advisors.