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"I already have life insurance through work."
"I don't have to pay for my insurance through my job."
"I'm not planning on leaving my job anytime soon, so I should be okay for right now."
These are all common defenses that have been made by working Americans that have an existing life insurance policy provided through their employer. And, while they think they're making a good case to keep from purchasing an individual life insurance policy, they may be surprised to learn the reality of the matter.
1. Once you terminate your employment, your insurance is also terminated
You never know what the future holds, and even though you may be completely satisfied with your job today, life happens. You may seek employment elsewhere for a number of reasons or life may hand you a wild card that requires you to relocate, and thus, be forced to find employment elsewhere. Whatever the case, the average employee tenure with one company is six to seven years, and that's on the high-end of the spectrum.
Remember that your employer-provided life insurance policy does not travel with you when you leave a job. An individual life insurance policy, on the other hand, follows you and allows you to use it no matter if or where you're employed. You can cross your fingers that your next employer will offer a life insurance policy as a benefit, but why risk it?
2. You need to adequately cover your family's financial needs
Despite what you may think, the amount of life insurance coverage that your employer provides is probably nowhere near the amount you may really need. So, how do you determine the amount of coverage that is right for you and your family?
At most, employers will pay for one to two times your annual salary. As we learned in Life Insurance exhausted in 3,2,1, amount can be depleted at the drop of a hat. Life insurance specialists recommend something more along the lines of eight to 10 times your annual salary. Investing in an individual policy that covers eight times your salary will allow your family to maintain the existing lifestyle they have become accustomed to and more.
3. As your age increases, your insurance rates increase
Let's assume that you stay at your present-day company for five more years. It would be wise to acquire an individual policy that allows you to lock in the rates now while you're younger. Unless we discover the fountain of youth, you can bet that your insurance rates are going to rise.
Keep in mind that even one year in age can make a significant difference in cost. Just ask a recently-turned-50 patron, and they'll probably tell you they experience a sense of "sticker shock" in life insurance rate whey they turned the big "five-oh."
Five years from now when you're shopping for a policy, group insurance will be more expensive AND you'll be older. From an insurance company's perspective, aging consumers translates being closer to the inevitable death and perhaps poorer health as well [when compared to five years prior]. Remember that life insurance companies base their pricing on objective calculations; there is little subjectivity when it comes to life insurance premiums.
Take time to consider supplementing your employer-provided life insurance with an individual life policy. It will allow YOU to determine the amount of coverage you need, while ensuring it's there when you need it, regardless of where you're employed.
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