Is getting life insurance through your employer good enough?

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Is getting life insurance through your employer good enough?
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Perhaps you’ve heard Clark’s advice to have a level term life insurance policy and thought, ‘Well, I have life insurance through a group policy at work, so I’m good.’

But are you really?

Read more: How to shop for term life insurance

Group policies vs. individual policies

A new report from life insurance research group LIMRA finds that only some 87 million households have any kind of life insurance coverage at all. That works out to be about 70% of Americans.

But of that 70%, almost half have group policies through their employer. The average coverage is $236,000, which is about 2.6-times income replacement.

Is that enough to get the job done? Well, first let’s define what the job of life insurance is.

Life insurance is intended to serve as income replacement for your heirs in the event of your untimely death. Nothing more and nothing less. That means annuities that combine a life insurance policy with an investment component are a no-no in Clark’s book.

‘Variable annuities come with huge sales commissions, huge expenses and a huge tax burden to you,’ Clark says. ‘And if you want out, you usually have to pay a massive fee known as a surrender charge.’

Knowing that life insurance is for income replacement, the first thing you might want to do is get the maximum income replacement you can at work.

The benefit of buying into a group policy usually means that you don’t have to pass medical underwriting. Another possible benefit is portability of benefits.

Portability of benefits means you can sometimes continue your policy even if you leave your employer—so long as you are willing to pay the full cost of the premiums. This arrangement was a tremendous benefit for our late contributor Matthew Quinlan and his family.

So those are some reasons why you might want to stick with a group policy. But if you want to buy your own level term policy, consider the following:

How do I shop for level term insurance?

You can comparison shop for term life insurance quotes at any of a number of sites like HealthIQ, Quotacy.com, PolicyGenius.com, 1stOptionInsurance.comInsure.com, AccuQuote.com or QualityTermLife.com.

By shopping online, you avoid an insurance salesperson trying to up-sell you from level term coverage to another insurance product that may be unsuitable for you.

Can I afford it?

Yes! One non-profit insurance industry group says that a healthy 30-year-old man can get a $250,000 level-term policy for 20 years at a cost of less than $13 a month.

That’s around $150 a year…and the price never goes up with a level-term policy!

How much coverage should I buy?

When it comes to the question of how much you should buy, people can get crazy with all kinds of complicated formulas. Clark says that you should buy six to 10 times your annual income.

Do I really need it?

Does somebody depend on you? Do you have young kids or a spouse or significant other that depends on you financially? Then you need life insurance!

And don’t forget about stay-at-home spouses. Should a stay-at-home spouse pass away, the remaining parent would have to suddenly pay for childcare and everything else a stay-at-home parent does on a day-to-day basis. That’s why it’s essential the parent at home have a policy too.

Don’t have any one who financially depends on you? that’s the only time you don’t need a policy.

Read more: This insurance company will reward you for eating healthy

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Theo Thimou About the author:
Theo is director of content for clark.com. He has co-written 2 books with Clark Howard, including the #1 New York Times bestseller Clark Howard's Living Large in Lean Times.
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