You just started a new career or been with a company for a while and open enrollment is around the corner. And now you have to decide whether to go with group sponsored life insurance policy or buy an individual life insurance policy. This can be a huge fork in the road for many people but the key is to educate yourself on the topic and the decision will appear in front of you, maybe even on this page. Personally when I am confused about a topic at hand I love a good pros and cons battle.
Although we will dissect both options please remember not to forget the important point. Which is that at the end of the day you need to get the right amount of life insurance coverage to protect your family and at a monthly cost you can comfortably afford month after month. Now we got that out of the way let’s put both plans to the test.
Employer Sponsored Plans
Great things about employer life insurance plans can be that the employer contributes to the cost and the plans are issued on guaranteed bases. Most companies will offer 1 to 3 times your annual salary amount in the form of life insurance at no cost to you. For more coverage you will have to pay an additional premium which can be paid for through payroll deduction. This is a great way to have some cushion in case of the unexpected especially when you don’t have to pay anything. In addition to that employers are given a certificate of coverage for the life insurance and they can add employees to it. Because of that you don’t have to go through a medical exam or provide medical records as you would for an individual policy. Your plan through work is given out on guaranteed basis, so this can be great for people with preexisting medical conditions.
Now that is where the pros end and you might be wondering why. That’s because group plans are not all that they are blown up to be. Here are few reasons why they fall short for us here at InsureChance. The group plans have rate increases every 5 years, limit the amount of coverage, may be more expensive and often are not portable. The rate increases happen because the insurance company will renew the contract every 5 years and it is very likely for them to renew with higher premiums. Also since the plans are offered on guaranteed basis you as an individual may be paying more for all the people who have serious ailments. The biggest downfall for me as an agent is that a lot of times you can not take the plan with you if you ever leave the employer. Coverage will just expire and now you will have to get your own coverage which will be offered based on your current age and health. Some other minor issues are that there is no customization allowed. Things like adding riders and that anytime the employer wants to drop coverage you can be left without protection. This is scary especially if you become uninsurable at one point or another. I think group plans are a good introduction to life insurance but you are doing yourself and your family a disservice by only relying on employer life insurance plans.
Individual Life Insurance
Individual policy is the absolute best way to get adequate coverage for a duration that you need and you can take it anywhere. Of course it does have its cons as well. First one is that you will have to qualify medically to get approved for the policy which usually requires a medical exam. The company will underwrite you based on your age, build, health conditions, family history and any dangerous hobbies. Unlike group coverage where it guaranteed issue with individual policy it’s best to get it when you are healthy. That is really the only bad part of an individual policy that we can find and even if you are not in the perfect health you are very likely to get approved. The key is to work with an independent agency that has lots of companies so you can apply with the one that is most likely to give you a policy. Good pros of an individual policy are that the rate is locked in for duration of the policy, you can get a very high amount of coverage, customize it and you can take it anywhere. Whether you buy a 20 year term or a permanent policy the monthly premium will be locked in so no surprise payment increases. You can also get the right amount of coverage to protect your family. If you make $100,000 per year you can buy a policy for $1 million or $2 million because 3 years of your salary is just not enough. Individual policies can be customized with riders such as child riders, disability and long term care riders. If you change employers or your company cuts cost and life insurance is one of the perks to go, you can sleep good knowing your policy is not affected.
At the end of the day I will always recommend an individual policy. The main reason is knowing that a client has control of their policy and not their employer. It is also very important that adequate coverage is purchased, one of the biggest life insurance mistakes is thinking you have enough coverage. When you sit down and do a needs analysis you can quickly realize that the $100,000 policy through work will not do much for your family. Especially when there is a mortgage, future college expenses, final expenses and loss of household income. Best solution is to get what you can at work but definitely supplement it with your own individual policy. Great news is that you can start shopping right now by clicking on the product of your choice to your right. Hope you enjoyed this article and if we missed anything please drop a comment below or call us at 888-492-1967 so we can answer any remaining questions.
