WHAT YOU SHOULD KNOW
You have benefits.
We think it is great that you have coverage under a group policy!
However, we want to make sure you are aware of its limitations and how personal life insurance fits into a well planned financial future.
Its likely not enough
Typically life insurance within a group policy pays out one year’s salary, sometimes a bit more.
For arguments sake let's say it pays out $50,000. This is generally not enough to cover typical liabilities you may have at the time of death (e.g. mortgage, funeral expenses, needs of future children and in the future, tax liabilities). It leaves your loved ones holding the bag for many of these one time and ongoing expenses at the absolute worst time. Most people without group policies apply for $500,000 to $1,000,000 of life insurance to be sure these expenses are covered.
Careful not to get locked out
For those that do invest in personal life insurance, the best time to do so is always when you are young and healthy. This means that you are low risk for the insurance company and as a result, the cost to you is as low as it will ever get and that low premium gets locked in. As you age, two things happen with regard to applying for life insurance. The first is that the premium, or cost, increases and can become out of reach. Secondly, and more importantly, you run the risk of becoming uninsurable. This happens when you are diagnosed with any one of a number of ailments that the insurance companies find too risky. This is the worst position to be in. So, the younger you are the less it costs and the more likely you are to be approved.
It's tied to your job, not you.
The term “Group Policy” means just that, it lumps you into a group by way of your job.
Once you are no longer part of that group, you no longer have that policy and that protection. There are a couple of scenarios at this point. First, is that you get another job and join their group policy so you are back where you started. But what if you decide not to go back to work, even if just for a few years? In that case you will be without coverage and have to apply on your own. This can be a real problem because you are now faced with increased rates and the potential that you will be locked out, as described in the point above.
Bank's don't accept this
Depending on where you choose to get your mortgage from when it comes time for you to buy your first home, the lending institution you choose will most likely not recognize your policies through work as actual life insurance protection, due to the reasons above.
At best, a group policy is a nice add-on to a personal policy. At worst, it creates a false sense of protection that prevents people from putting their own policy in place.