It’s getting to the time of year where you have options available regarding your life insurance through your employer. A lot of people think it is always cheaper to buy life insurance through work. While that may be true in some cases, I think there are a lot of reasons why it makes more sense to own your own life insurance versus relying on coverage through your employer. Here are three things to consider.
1. People Change Jobs
I just looked this up. The average number of jobs somebody will have in their lifetime is 12. I’m sure quite a number of those jobs is when we are in high school and college, but the same statistic said the average tenure for a job is a little over 4 years.
Even with me, since I started in the financial services industry, I have worked in 3 different situations. I was single when I was at John Hancock. I got married when I was working at Northwestern Mutual, and I moved to my current place when I was 50 years old. What could have happened if I had been relying solely on group life insurance?
If you change jobs, you usually lose the coverage through your employer. Also, different companies have different opportunities when it comes to purchasing life insurance. Why should you depend solely on the company? I have never thought this was a good idea. One way to prevent this from happening is to purchase your own life insurance. That way you aren’t dependent on what is offered through your employer.
2. It Might Be Cheaper
There is the perception that buying life insurance through your employer is going to be cheaper than it is if you buy it on your own. This might be true in some situations, but you need to look at what it costs through work versus what it might cost on your own. I have found that for healthy people who don’t smoke cigarettes, a lot of times it is more cost effective to purchase your own coverage. Here’s a chart that my friends at CPS Advantage, one of my insurance brokers, put together for me.
This chart is a little busy but let me explain the numbers. At the top of the chart, it shows three different ratings for insurance, preferred best, preferred, and standard. All of these ratings are for no-tobacco rates. Underneath that it shows $1,000,000 of 30-year term and 40-year term for various ages for both males and females. You might notice that the price of life insurance for women is less than the price for men.
Here are a couple of points you might not realize about term life insurance through work. Usually, they price group life insurance in 5-year age bands. 25-29, 30-34, 35-39, 40-44, 45-49, etc. When you hit the next age band, the price generally increases. The other thing I see is they quote the price per pay period. If you get paid every two weeks, you need to multiply the price per pay period by 26 so you can see the annual cost.
The final thing to remember is these rates get locked in for the term period. For example, a 35-year-old male in the Preferred No-Tobacco group, will pay $1893 per year for $1,000,000 of coverage. This price will stay the same for 40 years!
3. You Don’t Get Healthier as You Get Older!
If you work at a company, you buy all your insurance through the company and stay there for the rest of your life, then this point might not be that important. However, remember the average person has 12 jobs throughout their career! If you are solely depending on your group coverage, you change jobs and you want to purchase insurance above what they give out to everybody, you generally have to take some type of insurance exam.
I’m 59 years old. 6’3” 190 lbs. I ride my bike between 5000-6000 miles per year. I always thought I was Superman. Then I crashed, shattered my femur, and was told I needed to go see a regular doctor after I got out of the hospital. Over the years my blood pressure has crept up and I have glaucoma. So now, I take some blood pressure medication and put drops in my eyes. Maybe I could still get the super preferred rate like I have in the past, but maybe I couldn’t. Unfortunately, I see lots of situations where people wanted to buy insurance, waited, their health changed and now they either have to pay a lot more in premium or they got denied. Now what?
The point of this is, you don’t have to get put in this situation. Buy as much life insurance as you need and can reasonably afford as young as you possibly can. Don’t depend on your company or God forbid, Go Fund Me for your life insurance!
4. In Conclusion….
This is the time of year when it’s time to decide on your benefits for next year. It’s a great time to review your life and disability insurance needs. Talk to an advisor and figure out how much coverage you need to take care of your family. Compare the rates you are being shown at work versus doing something on your own. I don’t think it has ever been easier or more convenient to buy life insurance. A lot of the applications are done online and don’t require blood and urine tests like we used to have to do all the time in the past. This isn’t always the case but there are companies that will write 2-5 million dollars in coverage without the need for needles, tests, etc. If you want to talk about this, reach out to me HERE. As always, thanks for reading. KB