Life Insurance for the Unemployed
For many people, the benefits provided by their employer can be nearly as important as their wages. Aside from vacation and sick time, many full-time employees are also able to take advantage of a 401(k) match or pension, health, dental and vision care, and maybe even a few employee discount opportunities. Another common benefit employees may partake in is employer-paid life insurance, or group life insurance.
Group life insurance is one type of life insurance where a single agreement, or contract, covers an entire group of people, like the employees of a company. Typically with an employer-paid life insurance policy, the owner of the life insurance policy is the employer and the life insurance policy covers the employee. In many cases, the cost of group life insurance coverage can be less than what the employee would pay for the same amount of individual life insurance.
Group life insurance can be an important working benefit. It provides employees' loved ones with a little additional income if the employee dies. Unfortunately, many people believe that with employer-paid life insurance, they have all the coverage they'll need. Let's examine some of the pros and cons of group life insurance that you might be offered through your employer. Before you jump into any type of life insurance policy, use our Life Insurance Calculator to make sure you are covered appropriately.
Employer-paid life insurance is likely a part of a group life insurance plan. That is, the employer determines the amount of coverage for you, and you can participate for very little money or no money at all. This is a great start to life insurance, but with fewer options in coverage or term length, you may not have nearly the coverage you need to protect your loved ones.
If it's raining, you'd want more than half an umbrella, right? Employer-paid life insurance likely pays a smaller benefit than you might receive from your average individual plan (think one to two multiples of your salary). If you don't have any assets or loved ones to protect, this might very well cover you, but if you do have a family or partner, this amount may not be enough to support them if something were to happen to you.
Some employer-paid life insurance policies offer you the opportunity to buy additional coverage through the group. You often get to pay the rates for the additional coverage at the group rate, but you may need to take a medical exam and answer some health questions. Most group life insurance policies are for term life insurance, athough some groups offer you the option to buy whole life insurance, which covers you no matter when you die. To take part in this additional life insurance coverage
Much like the stapler, you can't take your group life insurance plan with you if you leave the company. Whether it's voluntary, a layoff or even for health reasons, you more than likely will not be covered after your employment ends. There are sometimes options to convert your group policy into an individual life insurance policy though, which is something you should talk with your benefits specialist about as soon as possible.
Even if employer-paid coverage is enough for you right now, putting off an individual life insurance policy may negatively affect your premiums down the line. Waiting until retirement, a major life stage (like buying a house) or when your health is impaired might lead to higher rates for age and health reasons.
The first thing to do is to review the group life insurance policy you have through your employer. Have a conversation with your benefits specialist, and make sure you understand the ins and outs of your policy. Next, review your assets - how many family members depend on you? How much outstanding debt do you have? Once you know this information, you'll have a better idea of how many years of your salary would be needed to keep your loved ones protected.
After you do your homework and decide on your life insurance needs, you might consider buying an individual life insurance policy and supplementing it with life insurance through work or group policy.
Of course, if you have any questions about the process, AIG Direct has licensed agents who are happy to help you better understand the coverage you might need. Get started by trying our life insurance calculator tool or by requesting a quote today!