If you’re interested in buying life insurance but don’t know where to start, you’ve come to the right place! The term life insurance is pretty self-explanatory, but most people either don’t yet have it or haven’t redeemed it from their employer.
Most employers grant their workers’ life insurance as a full-time benefit, commonly known as group life. Enrollment is sometimes automatic, but some companies make you sign up for enrollment.
If your work doesn’t offer health insurance you will have to buy your own, called supplemental life insurance. However, is purchasing life insurance from your work a good idea for you? Let’s give you a rundown of the top pros and cons to help you decide.
Basic or Supplemental Group Life?
Sometimes, employers offer a limited amount of life insurance at no cost. This is called basic group life. Your coverage amount may be $25,000, $50,000, or an amount equal to your annual salary. Since this offering is free, there is no reason not to sign up. Just make sure you fill out any necessary paperwork before the deadline. You will need to provide the names of any beneficiaries, otherwise, the money will go only to your spouse.
Your work may also offer you the opportunity to buy supplemental group life insurance. This would let you buy extra coverage of up to four times your annual salary. To opt in for this, you will typically need to fill out a questionnaire about your health. If you have a history of a serious medical condition, you may also be asked to provide your medical records, undergo a physical exam, and medical tests. This may result in your insurance coverage getting rejected.
Group Life Insurance Pros
Purchasing a group life insurance plan from your work comes with its own advantages. The three main pros of this type of insurance are acceptance, convenience, and price.
If you have a medical condition that would make it difficult for you to find life insurance at low rates, this can be a great option. With group life insurance, you can qualify for a much better rate than with an individual plan. Usually, a medical exam is not necessary, however, you will need to fill out a detailed questionnaire.
This sort of life insurance is also more convenient. It offers an easy way to protect your family and it is a lot less work-intensive to sign up for.
Also, you can usually find lower rates with a group plan.
Group Life Insurance Cons
The first consideration you should keep in mind is that you may not work for the same company for your entire lifetime. This can become a problem when it comes to your group life insurance policy. Even though you may be able to convert it to an individual plan, the cost will likely increase by a lot.
Also, the next job you take may not offer a group life insurance policy. If this is the case, you will need to buy an individual policy. The downside of this, though, is that rates increase as your get older.
Another con lies in the lack of variety. You will not find the range of policy options that would be available to you with an individual plan. Most businesses offer term life insurance. If you are looking for something more complex like universal life or whole life, you should look elsewhere.
Lastly, you may be unable to purchase the amount of coverage necessary through your employer. If you need more coverage, you should think about purchasing a supplemental life policy in addition to your term life insurance.
How To Make Your Choice
Here is a step-by-step guide to making your decision.
- If there is a free, basic group life insurance policy available to you, you should take advantage of it.
- Compare the price of the life insurance your work is offering to the price of any policies you can find on your own. There are online tools that can help you to compare costs and shop around for policies from various companies.
- If you find a comparable deal outside of your work, it is not worth it to purchase life insurance through your employer. Even if the cost is slightly higher, the outside insurance is the better option due to its portability.
- If you have substantial life insurance requirements, you should think about purchasing an individual policy and using your work-provided insurance to supplement it. This is an especially good option if you have a lot of dependents.
- If you are afraid you may not qualify for a good rate on an individual plan, a group insurance plan make work well for you. This is a good choice if you have a medical condition that may cause your rates to increase. However, you should also keep in mind the disadvantages that come with this sort of insurance policy.