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Should I buy Life Insurance through my job?

Life insurance is a service that many people are concerned with, but often don’t know the best way of obtaining. A life insurance policy provides a death benefit for financial security to your family in the event of your passing. These funds can be used to pay off your debts or medical bills, cover funeral costs, and also provide substitute income for your family in the wake of your death. People who are the sole provider for their family may feel more secure knowing that if they were to die, their spouse and children would be financially secure.

There are many different types of life insurance. You can select an inexpensive term life policy, which lasts for a specific duration, or you can opt for the more expensive universal life policy which has a cash value. You also have several options for where to buy a life insurance policy. You can buy a policy individually through a private company, or as part of a package with other types of financial services like a mortgage. Most employers also provide life insurance to employees.

Should I Buy Life Insurance from My Employer?

Many companies will provide limited life insurance benefits for free. For example, if you work in certain fields and pass away while on the job due to a job-related accident, your employer will pay death benefits. In addition to these free types of life insurance, however, many employers also offer a paid life insurance program to employees. You can sign up for this as part of an extended benefits package that covers health insurance and other employee benefits like stock options.

While purchasing life insurance through your employer may be convenient, the option is usually not ideal. Depending upon your specific situation, there are several reasons why group life insurance through an employer is not as good as an individual policy:

  • Group rates are often more expensive than individual policies. Since the insurance is being sold at a bulk rate, irrespective of the employee’s health or age, you may pay higher premiums to compensate for your more at-risk coworkers. If you purchase an individual policy, you will only have to pay rates based upon your own health.
  • Employee life insurance usually doesn’t cover as much as an individual policy. Group policies will usually be less flexible than your individual plan, and only cover a small amount in death benefit. For a similar or even lower price, you can select a plan with a much higher death benefit.
  • If you lose your job, your life insurance benefits will go away. Even if you’re able to keep the policy, you will probably lose whatever rate you were paying at and may not be able to get coverage for family members under the same policy. Depending on your age and health when you leave your job, obtaining a new life insurance policy could be extremely difficult.
  • You will usually only have one option for life insurance through your employer. If you’re considering taking out a universal life policy, or want to purchase a longer or shorter term policy, you would not have that ability with most employers. You would be limited to buying the term provided through the employer, or the term would be limited to the amount of time you were actually employed with the company.

Not Everyone Needs Life Insurance

Before purchasing a life insurance policy, either individually or through your employer, pause to consider whether you really need a policy. If you are a bachelor or have no beneficiaries, you probably do not need life insurance. Similarly, if your spouse makes equal or more money, you may want to purchase substantially less insurance than if you are the the main breadwinner of the house.

If you decide that you do need life insurance, it pays to comparison shop for the best coverage for a rate you can afford. In some situations, buying life insurance through your employer may provide you with ample coverage at a low rate. Other times, group life insurance policies are insufficient to cover the needs of you and your family. Only by assessing your family’s financial needs can you decide how much coverage you need and how much you will be willing to pay for.

Your best option for obtaining affordable life insurance is to obtain quotes online, call companies, and determine exactly how much coverage you can afford. If you are young and healthy, you can usually lock in a fair price on a long term policy that will sufficiently cover your needs.

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