Pros and Cons of Group Life Insurance Through Work
Basic life insurance through work is typically free, but coverage amounts are mostly lower than individual policies.
If you recently got a new job, or if it’s open enrollment season, you might have a chance to get group insurance through your employer at little or no cost to you.
Good idea? Know your advantages and disadvantages of getting coverage through work.
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What is group life insurance?
Most employers offer free life insurance as an incentive benefit. Employer-provided life insurance are sometimes referred to as basic group life benefit.
Coverage amounts are typically low, often ranging from $10,000, to a multiple of your annual salary. Coverage is generally guaranteed, which means you don’t need to take a medical exam or answer health questions to qualify.
Because basic life policies are free and coverage is typically guaranteed, there’s no reason not to accept it. All you have to do is sign up, and sometimes enrollment is automatic.
Fill out any required forms by the deadline provided, and make sure you name a life insurance beneficiary. Otherwise, the death benefit will automatically go to your estate, spouse or other relatives as determined by law.
Supplemental group life insurance
Many people opt to buy more insurance, known as supplemental life insurance, through their workplace plans.
The amount of coverage available varies among companies, but can reach $500,000 or five times your annual salary. The higher amounts mean you may have to fill out a health questionnaire. The results are used to calculate your rates and eligibility for coverage.
Pros and cons of buying life insurance through work
Here are three main advantages of getting group life insurance through your employer:
- Convenience. Getting coverage through work can be relatively easy. The paperwork is often part of your hiring documents, and HR departments or a designated employee are available to answer questions.
- Price. Basic coverage through work is usually free for the employee, making it an easy way to get a small amount of coverage at no cost.
- Acceptance. Most basic life insurance plans through work are guaranteed, so even people with serious medical conditions can qualify. Select supplemental plans may also allow the purchase of additional coverage, up to a set amount, without providing information about your health.
However, depending on your needs and long-term career plans, getting group life insurance through your employer may not be the best option. Here are three disadvantages to getting coverage at work:
- Coverage is tied to your job. If you leave your job, you may not be able to take the policy with you. This is often referred to as the policy’s portability. You might be able to convert your group policy to individual life insurance if you leave, but the cost could go up significantly. If your next job doesn’t offer group life insurance, you could buy an individual policy from the open market. However, the cost of life insurance typically increases as you age, and you never know if you might develop a medical condition that could seriously raise your rates.
- Limited choice. Coverage through work tends to be a type of term life insurance, and employers typically only work with one carrier. Therefore, you won’t find the range of policy options that you might find outside of work. If you’re looking for a more complex product like whole life or universal life, you should contact Diversified Insurance Brokers , Inc. 770-662-8510, Jarad or Jason.
- Low coverage amounts. You might not be able to buy as much life insurance as you need through your employer, as coverage amounts vary and can be low. If you need more coverage, you might want to buy an individual term life insurance policy instead of — or in addition to — your basic group life policy.
How to decide if group term life insurance is right for you
The first thing to do is to take advantage of any free basic group life insurance offered.
Next, compare the cost of supplemental life insurance available through your work to what you can find from Diversified Insurance Brokers, Inc., in business since 1980.
If you can get a comparable deal on your own, buying supplemental coverage through work may not be worthwhile. Even if the cost of an individual policy is slightly higher, it’s still probably a better bet because of its portability.
Figure out how much life insurance you need by taking a multiple of 10 times your income as a general rule. If you need a substantial amount of coverage, consider buying an individual policy alongside the free group life insurance you receive through work.
If you fear you won’t qualify for a competitively priced additional policy as an individual, perhaps due to a pre-existing condition, consider us as we have multiple companies to research and find the best possible rate.