Signed Up for Employer Life Insurance During Open Enrollment? Here's Why You Might Still Want a Separate Policy


If you’re an employee of a company or business, as opposed to being self-employed, there are different workplace benefits you may be privy to. These may include employer-subsidized health coverage, paid time off, and a 401(k) plan.

Your employer might also offer different types of low-cost insurance you can buy. Some companies, for example, offer relatively inexpensive pet insurance. Similarly, you may be able to buy life insurance through your employer at a very low cost. And some companies even throw in life insurance coverage for free.

If you’re entitled to this insurance through your employer, whether it’s one you pay for or not, you may be wondering if that single policy is enough to meet your needs. And the answer is no. It’s generally not a great idea to have employer life insurance only.

Why it’s best to have another life insurance policy

There are a couple of problems with employer life insurance you should know about. First, employer life insurance coverage tends to be somewhat limited. Your policy’s benefit may be limited to one or two times your salary, when financial experts commonly recommend a benefit to replace your salary 10 times over at the least.

In fact, Guardian, an insurance company, has a recommendation that’s far more aggressive than that. Guardian says you should consider getting up to 30 times your income if you’re buying life insurance between the ages of 18 and 40. Otherwise, it recommends 20 times your income at age 41 to 50; 15 times your income at ages 51 to 60; and 10 times your income if you’re 61 to 65.

Now, that’s just one recommendation. If you’re 30 years old earning $60,000 and you decide to buy $600,000 worth of life insurance, you may not by any means be leaving your loved ones high and dry. So if you don’t want to spring for 30 times your salary, or $1.8 million, as Guardian suggests, that’s totally acceptable.

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The problem with employer life insurance, though, is that you may only be eligible for coverage of $60,000 under that policy, or $120,000. That’s probably not enough to protect your loved ones.

Another issue with employer life insurance is that it’s often not portable. This means that if you leave your job — whether by choice or not — you lose your life insurance. Without a separate policy, your loved ones could be left with no protection at all.

It pays to shop around

The nice thing about employer life insurance is that it’s often inexpensive and sometimes free. Also, unlike life insurance you apply for yourself, employer life insurance usually doesn’t require you to undergo a medical exam. If you have health issues that a medical exam unveils, it could drive the cost of life insurance up.

However, it’s really important to have life insurance outside of your employer. So if you signed up for employer life insurance during your most recent open enrollment period for benefits, make a point to start shopping around for coverage with different life insurance companies. That way, you’ll know you have protection for the people you care about that has nothing to do with your job whatsoever.

Our picks for best life insurance companies

Life insurance is essential if you have people depending on you. We’ve combed through the options and developed a best-in-class list for life insurance coverage. This guide will help you find the best life insurance companies and the right type of policy for your needs. Read our free review today.



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