Why Employer-Provided Insurance Should Not Be the Foundation of Your Financial Plan
Several companies make an initiative towards the betterment of their employees, and providing for life insurance coverage is one such incentive. By incorporating life insurance in the benefits package, the employer expresses the aim to support not only the employee, but also show care for their family members.
Like any other kind of life insurance, coverage provided by employers has its pros and cons, and every employee should have a basic understanding of the same:
Pros
- Relatively Inexpensive Premiums
Companies that offer life insurance coverage for their employees usually go for group insurance which inevitably brings down the premiums as a group policy is subject to single group premium payments, making the policy relatively inexpensive for their employees thus making protection through a large insurance plan available at lower costs. - Hassle-Free Premiums
While employees normally get their medical insurance costs deducted either on a monthly or bi-monthly basis directly from their paychecks, life insurance costs can be deducted the same manner, which makes contributing to these plans easier. Also, when the company opts for group policies there is never a need for medical examinations which makes it hassle-free. - Protection for Dependents
It goes without saying that purchasing life insurance is directly correlated to protecting the financial security of your family, which includes your spouse and other dependents. Hence the employer aiding in the coverage of the life insurance plan of their employee is looking out for the employee’s best interests, i.e. their family.
Cons
- Loss of Coverage Due to Change of Job
The most important thing to consider is that when you leave the job, you can’t take the coverage with you. Companies are only liable to pay for your life insurance while you continue to remain employed with them. This raises the stakes when you agree to life employer-provided coverage, putting your security at risk if you quit. Gaps in life insurance policies should be avoided, since the need to utilize them can surface anytime. - Coverage Might Be Less than What You Really Require
Employers that do offer life insurance to their employees might not be willing to compensate them for the amount of coverage they truly require. This is because the insurance that is included in employer-sponsored plans is usually only 1x or 2x the amount of the annual salary you earn, which is often far lower in comparison to the actual financial security your family might require in the event of your premature death. - With Decline in Health, Employer-Assisted Life Insurance Suffers
It becomes extremely important for those who have employers assisting them with their life insurance policies to not rely on this coverage alone, especially if they have declining health. If declining health leaves you unable to work, that could mean losing your life insurance coverage altogether, and when it is required the most!
The Bottom Line: Life Insurance Offered by the Employer May Not Be the Best Bet
Not only is the insurance policy offered by an employer not guaranteed, for it can rise in price or be stopped at any time, leaving you helpless in times of requirement, it also tends to get more expensive as you age and get closer to retirement.
This ends up leaving a huge question mark on your overall financial security and the efficacy of the employer-aided coverage. As the cost of living rises, it becomes even more essential to also invest in an individual plan that accounts for inflation, so get in touch with an experienced advisor and look over the options today!