When you get a new job, you’re going to have to answer a lot of questions right off the bat. What’s your direct deposit information? Are you going to join the dental or vision plans? Which slot would you like on the kitchen duty roster? Chances are you’ll be asked how much life insurance you’d like through your employer. As part of their benefits package, many employers offer free life insurance known as group life. Sometimes you don’t have to do anything, and you’re automatically enrolled.
While some employers offer free life insurance, it’s often nowhere near the recommended amount to insure your family effectively. The basic group life plan could be a round figure, often between $25,000 and $50,000, or it could be your annual salary rounded to the nearest $1,000.
Should You Accept this Group Life plan?
Absolutely. There is no reason not to accept a group life plan through your employer, as coverage is generally free up to a certain point and guaranteed. To participate, be sure to fill out any necessary forms by the deadline provided; you may have to wait until the next year to enroll again if you miss it. You will need to select one or more beneficiaries on the policy so that it’s not left up to the courts to determine who will receive the benefits in the event of your death.
Buying Additional Group Life Insurance Through WorkYou may be able to buy up to three or four times your annual salary in supplemental group life insurance through your employer. While the free group life may be guaranteed, higher levels of insurance could require you to show “evidence of insurability” by filling out a health questionnaire. Depending on your health or other risk factors, you may be required to provide access to medical records as well as submit to a physical exam and other medical tests. This further coverage is not guaranteed and can be rejected based on your test results.
Buying into a group life plan through work can give you great insurance rates and incredible convenience. Any insurance is better than no insurance at all, and a group plan is one of the easiest ways to get coverage. If you have health conditions that may affect your qualification for life insurance, group policies may give you better rates than going it alone.
Should You Rely Only on Group Coverage?
While having group coverage is a useful foundation, it’s not your best bet if you want lifelong security. The advantages of a group policy—convenience, cost, and guaranteed coverage—can also become disadvantages if you move employers. Great rates and an easy process come from limiting your options. When there are no decisions to make, it makes things simple: say “yes” and move on. While term life insurance could be working for you, a more complex product like whole life or universal life might be a better fit for your needs. Talk to your agent to see what options would be best to consider.
Though the price of coverage may be cheap when you start a job, it’s not likely that you’ll be with that employer for the entire time you need coverage. According to the Bureau of Labor Statistics, the average American holds 12 jobs before the age of 50. The odds of holding the same job for longer than 4 years get slimmer as our working habits change. You may be able to convert your group policy into individual life insurance, but the cost could be significantly higher. If you can’t, you may find it difficult to qualify for new coverage due to changing health circumstances. Rates increase as you age, so no matter what, insurance is going to be more expensive when you leave an employer than when you started.
Finally, group life is generally capped at a certain amount. If you need more than that—and you probably do—you might need to consider buying insurance on your own in addition to group life.
Weighing Your Options
While navigating all your employment benefits may seem daunting, life insurance can be the simple part. Take advantage of the group life policy if your employer offers it but know that this coverage is likely not enough. Meet with an FFS agent to discuss your options—from group life through your employer to individual policies—and ensure that you’re safeguarding your family’s future today.