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Questions to Ask Yourself Before You Buy Life Insurance with Your Employer

If your employer decides to offer life insurance free of cost to every employee in the company, it’s often a good idea to take advantage of the opportunity, and obtain coverage. If there is additional insurance on offer that you can buy on top of the basic plan, however, you should ask a few questions.

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Questions to Ask Yourself Before You Buy Life Insurance with Your Employer

Purchasing group life insurance at your workplace can be a convenient way to get coverage. If you have a health condition like diabetes, or high blood pressure, both of which are associated with lower life expectancy, you’ll find it hard to find affordable coverage anywhere else. The life insurance company will ask you a few questions about your health, but you won’t need to get yourself medically examined.

There’s one area in which life insurance purchased at the workplace falls short, however. Unlike insurance that you purchase on your own, you aren’t in control of insurance that you get at the workplace. You may get good terms or mediocre ones, depending on the contract that your employer has with the insurance company. If you need to get more insurance than the free offer at work, it may be a better idea to find coverage elsewhere.

What follows are five basic questions that you need to ask yourself before you opt in and buy life insurance on your own.

Ask yourself how much life insurance you need

When your employer offers free coverage, two years’ pay is the usual sum that your family is assured in the event of your death. Two years’ pay is usually unlikely to be adequate, however. Multiplying the coverage that you get at work by 15, and adding on enough to take care of home mortgages and college for your children, makes sense.

Is there a low cap on your work insurance?

Often, you can add on additional coverage with your insurance at work, but there is likely to be a cap on how much you can buy. Typically, you can buy no more than 10 times your annual salary. If you need to buy more, you’ll need to look outside of work.

What sort of life insurance do they offer at work?

Most companies offer their employees term life insurance. Such insurance lasts a few yearsand is usually the most that families need. Sometimes, there are options offered to buy a small amount of additional coverage for a husband, wife, or child, as well.

In some workplaces, employees are given the alternative to buy permanent life insurance. With universal life and other kinds of permanent coverage, there is no set period of time for which coverage lasts. You keep paying into it, and it lasts as long as you live. Permanent life insurance tends to be more complex than term life insurance. It’s important that you understand how it works. It’s also important to pay attention to how much the value of your deposits will grow over time. Usually, since it can be hard to predict the returns on permanent life insurance, insurance companies only offer conservative estimates.

Think about how much it costs

When you buy insurance through your employer, it’s usually affordable, because your employer buys for a large number of employees, and gets favorable pricing.

If you’re healthy, however, you may actually get more competitive pricing when you buy outside. It’s easy to check with the many life insurance quote-generating calculators to be found on the internet. Surveys indicate that most consumers believe insurance outside of the workplace is far more expensive than it really is. Such misestimations tend to discourage people from even trying to look for competitive deals outside of work.

When you compare the cost of regular, self-purchased insurance with workplace insurance, you should consider whether coverage with your employer will become costly with time, as you grow older. Prices usually do rise. When you buy insurance outside, however, you may be able to easily find a level premium policy that keeps the premium unchanged for the entire duration of the policy.

Think about whether you can keep your insurance when you leave the company

Before you sign up for your employer’s insurance coverage, it’s important that you think about how long you will work there. If there’s a possibility that you will switch jobs at some point, you will need to ask your employer if the coverage offered is portable. Some employers will give you the option to continue to keep your insurance even if you work elsewhere. You’ll need to pay a higher premium when you go to work for a different employer, however, or your coverage will decrease.

Open enrollment for workplace insurance usually starts in the fall. It’s a good time to look at your finances, decide how much life coverage you have, find out if you have any insurance gaps, and buy the appropriate amount of insurance, either at work or from outside.

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