Lesson 4: Personal Life Insurance

Group Life Insurance

Many people believe that personal life insurance is an unnecessary expense because they have life insurance as a part of the "benefits" provided by their employer. There several things to consider regarding life insurance through work. First, this form of life insurance is generally term insurance. This means that it will last for a certain amount of time, typically until your employment ends. This does not mean, however, that your share of the cost will remain the same. Moreover, when it is over it is over. Even if you are permitted the option to renew it, the expense would be prohibitive, particularly for a retiree or someone out of work. The dollar amount of this insurance is generally low, in some instances as little as $10,000. Secondly, national statistics indicate that most workers will change jobs or careers an average of six times in their working lives. Will all of these employers have equal benefits, including life insurance? Might you have developed a health conditon that would preclude your getting life insurance, or add additional cost (insurance jargon:ratings) that would make the price prohibitive? Is there a possibility that the company you work for could be bought out by another company causing a change in your benefits which might include the reduction or cancellation of your life insurance? You get the idea. So what does all of this mean to you? If your benefits package contains life insurance, then you have whatever it is. It comes with the territory. (Buyer beware:although you may have benefits at work they are not "free". Your employer on average could pay you 20% to 30% more in wages if he or she were not paying for benefits. This would not necessarily be a good trade off but is cited merely to dispel the notion of free benefits). The concept of insurance through work regardless of health conditions (insurance jargon:guaranteed issue) is rapidly becoming a thing of the past. But if guaranteed issue life or health insurance is available to you through your work, go for it. The bottom line is that life insurance through your work if fine as far as it goes; but is likely to be a supplement to not a substitute for personally owned life insurance. For some additional myths and mistakes regarding purchasing life insurance see Hungelmann, pp.310-14.

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