The Five “No’s” of employer-sponsored life insurance
Life insurance is frequently sponsored by employers as a group benefit for their workforce. Is it a nice add-on perk? Yes. Is it a cheap way to get some coverage? Yes. Is it the way most people should purchase the life insurance they need? No.
As a matter of fact, there are Five No’s. Here they are:
Your employer owns the policy, not you, They can drop the benefit any time they want. You may not qualify for a well-priced private plan when they do.
If you switch jobs or start your own business, you probably won’t be able to take the coverage with you. If you can, you may have to convert it to a policy that is not right for you.
No rate guarantee.
Over time, the cost of the group benefit goes up. You cannot lock into long-term rates, as you can with an individually-owned plan.
No comprehensive coverage.
Group insurance typically provides a few multiples of your salary. This is usually not nearly enough to provide all the cash your family will need, should they tragically lose you.
No liquid benefits.
Living benefits are often not available on group plans. Individual policies can give you cash and accelerated benefits for retirement, long-term care and terminal illness expenses.