Life Insurance for the Unemployed
For many employees, 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.
Employer-paid life insurance is 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.
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 few 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.
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 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 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.
So what can you do now?
The first thing to do is to review the 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. 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.