Top 5 Reasons Why Life Insurance Through Your Employer Sucks!

                         

Congrats on getting that new job! Everything is new and exciting and you have renewed hope for your future. You get to make more connections and learn something new. Many find themselves in this situation, and the last thing they are thinking about is whether they should sign up for the company's group life insurance, or purchase from a 3rd party insurance company. But this should definitely be worth pondering. It's my hope to educate and open your mind to the possibility of buying life insurance from a life insurance company for the reason that you will be getting much more value, and have a superior product that will last you longer than your current job.

Life insurance is not the most exciting topic in the world...well, it comes pretty close for me, but that's neither here nor there.... If you are reading this, you might be wondering why you should consider buying life insurance from a life insurance company rather than the group plan offered by your employer. After all, that group plan is considerably cheaper. 

So what's the problem?....

Well, let's get into it! Have you ever hear the expression: "you get what you pay for". Yeah, that is about how I look at group life insurance through your employer. 

Let's state the facts:

1) Life insurance through your employer is cheap.

2) Group Life Insurance is typically Term Life Insurance, which means you are basically just renting the policy. It is not permanent.

3) With a group life policy, it goes away when you leave your job or are fired. 

4) When you opt for the group plan, you do not get a personalized experience based on your unique situation.

5) A group term policy does not offer a tax-free savings aspect to the policy, nor does it offer a living benefit.

Group Life Through Your Employer is Cheap..but why?

Group life through your employer is cheap because the insurance is not based on your age or health. Therefore the rates are not based on the risk of just insuring you personally. The rates are determined based on the risk of the entire group. The insurance company takes on less risk on an individual insured in a group policy that if they insured you individually. So the group life coverage is being purchased on a larger scale, and the likelihood is low that the insurance company will have to pay a death claim on you. You are more likely to move on to a different job, at which time that group coverage ends.

So when there is less risk absorbed by the Employer Life Policy, the cost is naturally less to the purchaser. 

Group Life Insurance is Typically Term Life Insurance

Not always, but most Group Life Policies are Term Life Insurance. What this means is that you are only insured for a specified number of years. Usually 10, 20, or 30 years. Essentially, you are betting that you will die within the specified term length. 

...Now especially for younger people, what sense does term insurance make? What is the likelihood that a 20 or 30 something is going to die in the next 30 years? ...Not a high likelihood! But this is not to say that younger people should not be properly insured. Details coming later in the article, keep reading.

To my point...when you buy term insurance, you are really only renting the insurance policy. You don't own it for the rest of your life.

Group Life Insurance Goes Away When You Leave Your Job or are Fired

Yet another pitfall of group life insurance through your employers is just that....through your employer. Meaning that when you leave your employer, your group plan will not follow you. Now, you will have the option of purchasing another policy tat will be based on your age and health at that specific time, but you will not be getting those cheap group rates. 

Think about it, the average employee changes jobs several times throughout their career. This means that with every job change, the employee is older and in possibly worse health....making the employee less insurable each time he/she changes jobs. 

No Personalized Experience From a Professional Acting in Your Best Interests

When you set up your group life insurance, you are only a number. No one will consider your unique situation, or show you how to achieve your financial goals, and tailor a solution for you based on your situation. You just choose how much you want, then forget it. How can you hope to achieve your financial goals without help? Self-made is not an accurate term, most successful people are team-made.

It's important to have a professional on your side and showing you how to achieve your financial goals, and helping you achieve them by putting in place a properly structured policy. Yes, life insurance can help you achieve your financial goals.

No Living Benefits or Tax-Free Savings

Lastly, a group term plan will not likely contain Living Benefits, and definitely will not contain a tax-free retirement savings account. Living benefits are benefits the insured has available to them whilst he/she is living. These benefits would include the policy paying up to 90% of the death benefit when you become critically, chronically, or terminally ill. The policy will also pay out when you become critically or chronically injured when conditions are met. A group policy will not do this as it is just pure insurance with no bells or whistles.

A group term plan will also not give you an option to save money in a cash value account that earns interest. This is simply because there is no cash value portion in a term policy. Cash value is unique to Whole Life and Universal Live Policies. 

There you have it. These are my top 5 reasons why life insurance offered through your employer sucks. Stay tuned for the flip side of this...why buying life insurance through a life insurance company kicks ass!

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