Is group life insurance enough?
Group life insurance is a popular employee benefit, and you can't beat the price -- many employers who offer it pay the entire premium.
But while it's a great deal for you, it probably doesn't meet all your needs for life insurance if you have a family to support. Here are three reasons why:
1. You can lose it.
Generally group life insurance is not portable. Once you leave or lose your job, the life insurance coverage disappears. In addition, your employer can decide to yank the benefit if the premiums are too high, leaving you without coverage. Lack of portability creates a vexing problem if you rely on group coverage and then develop a health condition. You might have trouble qualifying for decent rates for individual life insurance when you leave your job.
Some employers offer voluntary life insurance benefits. You pay for the coverage, but you get the group rate, and you can take the coverage with you when you change employers. Ask if your company offers a voluntary benefit, and compare the policy and price to individual life insurance quotes you get on your own.
2. The policy may not offer enough coverage.
Most group life policies offer a relatively small amount of coverage, typically equal to about a year's worth of salary. Some budget-minded employers offer group life benefits for even smaller amounts, such as $10,000 or $20,000. If you're single and have no dependents, that might be fine, but if you have children, a small group policy won't be enough by itself to cover such expenses as mortgage payments and college tuition bills.
3. Few options are available.
With an individual policy, you can tailor coverage to your needs. A variety of riders -- policy add-ons -- are available to enhance the coverage. A group policy does not come with all the options you can get with individual insurance.
Unless you don't need life insurance, think of group life as a supplement to individual life insurance coverage. To determine how much and what type of individual life insurance to buy, consider how long your family needs life insurance protection. Most people want coverage until their children graduate from college and the mortgage and other debts are paid off. Then consider how much money your family would need, and how much you can afford to spend on life insurance. Work with a good life insurance agent to guide you through the planning process.