Pros and Cons of Getting Life Insurance from Your Employer

Benefits offered by your employer are always a plus; it helps show that your employer cares about you and wants to help reward your time and effort dedicated to the company, and with the economy fluctuating all the time, it probably seems unreasonable to turn down any offers. Life insurance coverage offered from your employer may be tempting to accept without any hesitation, but before you sign on too quickly, it’s important to consider both the advantages and disadvantages of employer sponsored life insurance plans.

The Perks

Life insurance offers financial peace of mind to you and your family, and it allows your employer to be better able to continue the company if something were to happen to you. There are many advantages for having your employer sponsor your life insurance policy. Not only is it paid for (or at least greatly reduced), but most life insurance policies provided by employers require no medical evaluation of your personal insurability. Factors such as smoking, weight, current health conditions, and health history that would usually make your premiums skyrocket, or even cause you to be deemed uninsurable, aren’t considered when a group life insurance policy is taken out. It’s a one-for-all kind of a deal, and it’s a great incentive for those who wouldn’t qualify for or otherwise couldn’t afford their own individual policy.

If the life insurance is offered at a discounted rate, it’s much more convenient to pay off. Most employers will deduct the amount out of your pay check, or more recently, right out of your super fund. That way, you don’t have to worry about keeping up with payments as the administrative duties are already handled for you.

The Kinks

As with most things in life, there are both negative and positive sides to accepting employer-sponsored life insurance. As nice as it is saving money on life insurance by going through the company’s policy, there are a few things to consider; it’s important to really sit back and think about you and your family’s needs. Many group life insurance policies don’t offer adequate coverage for employees with dependents, and if the purpose of having a life insurance plan is to be able to allow your family to pay off your debts as well as be financially provided for in case something were to happen to you, group life insurance probably won’t cut it.

One other thing to think about is that your company insurance plan covers you for the time you’re employed there; it does not protect you if you should decide to find employment elsewhere, if the company goes under, or if you’re laid off or fired. Having to start a policy over again can be more costly, and if you decide on term insurance, your cycle will start all over again. Some insurance companies offer a continuation plan in the event you lose your employer sponsored coverage, but those generally come with significantly higher premiums. If you’re working at a company with a strong reputation, and if you plan on sticking with it for a while, this might not be of too much concern. On the other hand, if you don’t like the feeling of being tied down, then getting an individual plan would probably be the best option.

A group life insurance policy is owned by the employer, and therefore, he/she is the only one who can make any changes or additions to the plan. Often times, employers do this without consulting their employees, so if there are certain things that you strongly want or need to stay consistent with your plan, it’s best to own your own policy and have full control over it.

Evaluate Your Needs

After weighing the pros and cons associated with what insurance plan your employer is offering, it’s time to make the decision. Many experts recommend using any free or discounted life insurance policy being offered as a supplement to your own plan, but not as the sole provider. You can never have too much coverage, but you can certainly have too little. It’ s best to work out your individual needs , compare it with what is being offered by the company, and make sure to cover the rest yourself. An individual policy is usually the best choice because it allows for mobility, adequate coverage, and freedom of changing or modifying the policy. After all, it’s best to be the one in control when it comes to matters regarding the future safety of you and your family.  Mark Haberfield  writes for AAMI life insurance when he’s not spearfishing off the NSW coast.