Work Life Insurance Policies

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As an independent insurance agent, I cannot remember how many times I’ve been told: “I’m good. I’ve got life insurance at work.” When I say I can’t remember, I mean I’ve heard this response so many times I’ve lost count. Please don’t misunderstand. It’s not a bad thing. In fact, I always congratulate prospective clients for taking advantage of company life insurance, especially if your employer will pay for it.

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The problem is that most people are misinformed or simply don’t understand what company life insurance will and will not do for them. Yes, it will pay your beneficiary if you die while your policy is in force, but there are some drawbacks to thinking free life insurance at work will take care of your surviving loved ones if you were to die unexpectedly. As a matter of fact, this problem is actually growing even though experienced agents continually attempt to help people understand that group life insurance contains some pitfalls. In many cases, basic life insurance won’t cut the mustard.

Employer-Sponsored Coverage is Growing – Sort Of

In August of last year, LIMRA, an international life insurance and market research association, published their findings that more individuals were covered by employer-sponsored life insurance than by individual life insurance plans. Certainly, this would be a good thing if the majority of the employees also had their own individual life insurance policies, but sadly they don’t.

Even though the number of employer-based insurance policies surpassed individual insurance policies by six million policies, the percentage of American households covered by employer-based life insurance was actually down when compared to the percentage in 2004, and in many cases, the policies were considered basic life insurance, meaning optional riders were not available to the policyholder.

What’s the Matter with Employer Life Insurance?

If you have life insurance through your employer, congratulations, but how much do you have? A typical employer life insurance policy is one to three times your annual salary. So then, if you are earning $60k a year at work, you probably have $180,000 in life insurance coverage which, in most cases, is not enough for a typical family of four, which means your life insurance through work is not sufficient for your needs.

Living Expenses

First and foremost, if your family’s living expenses amount to $50,000 a year and it costs about $15,000 to bury you, what happens in year four? Typically what happens is your spouse has to scramble to make up the difference. Nothing else will matter. College tuition most likely won’t get covered, the mortgage is still due each month, and you can forget about investing for retirement.

Group Health Benefits

If your employer was paying the bulk of your health insurance, unfortunately, that goes when you go. Now we have to add the cost of health insurance to the surviving spouse’s expenses.

There’s No Place Like Home

In most family situations, the spouse helps make the mortgage payment. If your only insurance is through work, it’s unlikely that your work insurance is able to leave a paid-for home to your family.

Coverage is Up to Your Employer

Most employees assume that once their employer provides them with life insurance, that BENEFIT can never go away. Sorry, but insurance is a benefit and is never guaranteed. If your employer decides they can no longer afford it and decides to discontinue paying the premium, you are now uninsured. Unfortunately, Uncle Sam will not step in and save the day. When it’s gone, it’s gone.

It’s Not Portable

In most cases, your employer-based life insurance doesn’t follow you if you leave your employer. If you are laid off or fired or if you decide to leave and start your own business, your work insurance will typically not follow you. Sure, you can always buy another one, but what if you’ve developed a health issue like diabetes or high blood pressure? Now, your free insurance just turned into expensive insurance.

How much Life Insurance do I Need?

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How much life insurance you need is one of the most important questions you can ask. But your employer-based insurance coverage is limited, so it’s unlikely that you’ll have a choice when you are provided coverage.

Your insurance needs are based on various financial needs that your surviving loved ones will be facing when your income is no longer available. An experienced and reputable insurance broker will help you calculate your life insurance needs so you can arrive at the appropriate amount of coverage. When you have that amount calculated, you will understand how employer-based life insurance falls short regarding coverage.

You can even do this on your own so you’ll know your insurance needs before you contact an insurance broker. There are life insurance calculators online that will take you through a series of questions in order to calculate your life insurance needs, and there is no obligation to buy anything.

How Can I Find the Lowest Rates?

This is actually the easy part. Technology today allows most insurance brokers to provide insurance costs online. Most have a Quote Engine on their website that will allow you to get quotes from many of the highly-rated insurance companies in the marketplace.

Once you know how much life insurance you need and the approximate monthly premium, it’s time to contact an independent insurance agent like LifeInsure.Com and finish the process by completing the application. The great thing about using an independent broker is that they are paid by the insurance companies, so there is no cost for you to have them advocate for you. They will do the work to get your policy issued.

Speak with a Professional

For more information about individual life insurance, call the professionals at You can reach at (866) 868-0099 during normal business hours or contact us at through our website at your convenience.

Frequently Asked Questions

Most employee life insurance plans are term insurance with a death benefit that equals a multiple (2 or 3 times) of your salary. Most group term plans do not have optional riders available so the insurance is considered a basic policy.

Typically, an employee’s group life insurance coverage does not follow the employee if they leave the company.

Typically an employer-sponsored group life insurance plan is term insurance which does not build cash value.

Unless your life insurance plan at work is a Key Person policy, your group plan is not portable and it is canceled when you leave your employer.

No. Since you basic employee life insurance does not build cash value, it cannot be collateralized for a loan from the insurance company,

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Richard Reich
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