Beyoncé. Phil Collins. Michael Jackson. Justin Timberlake. Gwen Stefani.
Being part of a successful group has its benefits, but sometimes you’re better off as a solo act.
And you thought this article was about life insurance. Well, actually, it is.
According to the life insurance research organization LIMRA, 59% of people say they own life insurance, but 30% of those are covered solely through group insurance provided by their employer. While that coverage is a good start, workplace coverage by itself may not be enough.
“Don’t think about it like your car insurance or your health insurance. It’s a different animal altogether,” said Steven Sweeney, CFP®, CLU®, ChFC®, a senior sales consultant for Transamerica’s Advanced Markets Group. “You need to meet with somebody to make sure you’re adequately covered.”
Limitation of group plans
Many employers provide group term life insurance with a payout equal to one year’s salary at no cost to the employee.
Workers then have the option to purchase additional coverage, with the premiums deducted straight from their paycheck. Group coverage is not portable, meaning it ends when you leave your employer.
While workplace coverage is a nice perk, Sweeney emphasizes you shouldn’t count on it as your sole source of life insurance.
“There’s a common misconception that your employer-provided coverage is adequate,” Sweeney said. “It’s either not enough coverage or there’s the possibility that if they leave that company, it’s not going to go with them.”
Consider an individual policy
An individual term life insurance policy can provide substantially more coverage at an attractive price.
With term life, a policyholder buys a set amount of coverage (say $250,000) for an annual premium (say $500) that’s dependent on age and health considerations. The term generally runs anywhere from five to 40 years, and the $250,000 is payable to the beneficiary if the policyholder passes away within the term period.
Some term life products even offer living benefits that can be accessed if the policyholder becomes chronically, critically, or terminally ill.
Permanent life insurance, is another option, but tends to cost more than term. Using the example from above, the named beneficiaries receive the $250,000 payout when the policyholder passes away.
Though the premiums are higher, permanent life insurance can build cash value that can be accessed as a tax-free loan in later years, if necessary. Keep in mind that any money taken from the policy reduces the benefit if the policyholder dies.
This is just the tip of the iceberg when describing term and permanent life insurance. To figure out the type of life insurance and the amount of coverage you might need, talk to a financial professional. Or for more information, check out our blog post on Knowledge Place.
What types of life insurance do you have or are considering? Share your experience with the community.