Group Life Insurance is Not Enough

Many employers offer free life insurance to employees – anywhere from $25,000 to a level equivalent to your annual salary.

Of course you should take advantage, but don’t assume that this is sufficient coverage for your needs.

For a single person, $25-50k seems like a nice amount for the loved ones you’ve left behind.  But it may not be enough. Funerals can be expensive. Do you have co-signers on any financial obligations? If you die, they’re on the hook. You’ll want to make sure that your life insurance will cover those obligations.

Healthy young people who don’t need extensive coverage can find very reasonably priced term life policies. But for those who are married or have children, more coverage is necessary. To arrive at the right amount of insurance, you’ll want to add funeral costs, debt, income for loved ones if they need to take time off to grieve, child-rearing expenses, college costs and whatever else you deem necessary. You may need as much as ten times your annual salary.

Some employers may offer the opportunity to purchase additional life insurance. Since you are obtaining the insurance through your employer, it may be cheaper than purchasing a policy from an external source. Bear in mind, however, that the company owns the policy. If you are fired or resign, that is the end of your life insurance. Some employers may offer the option to continue the policy at a higher rate, but don’t count on it.

While you should of course take advantage of the free group life policy, you should consider buying further insurance independently. Then, the insurance stays with you and you will be able to lock in a low premium when you’re young and healthy.

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