3 Reasons Not to Purchase Employer Supplemental Life Insurance, #109

Retire With Ryan

Whether you're onboarding at a new job, or simply reviewing your existing benefits, you might be thinking about buying supplemental life insurance through your employer. On this episode, I’ll go over the three reasons why you should NOT purchase employer supplemental life insurance and the benefits of getting an individual life insurance policy.

You will want to hear this episode if you are interested in...

• Exploring employer life insurance options [1:25]
• Three reasons to stay away from employer supplemental life insurance [3:44]
• Finding the perfect individual term life insurance policy [10:17]

Understanding employer-based life insurance policies

Many employers offer life insurance as a part of their benefits package. Typically, we see life insurance benefits offered in two different forms. The first is usually free and is sometimes referred to as basic group life insurance that pays out a fixed dollar amount or a portion of your salary in the event of your death. Because coverage is usually guaranteed and an included perk of employment, signing up is an obvious choice.

The second life insurance option given by employers is known as supplemental life insurance, and there is a cost associated with it. Paying for this coverage allows you to customize and increase your coverage limits per what your employer allows. Getting this coverage is a fairly easy process that requires some light paperwork. Similar to basic group life insurance, acceptance is all but guaranteed, making this a decent option for those with serious medical conditions and other potential underwriting concerns.

Only pay for what you get

If employer supplemental life insurance coverage is so convenient and easy to obtain, why should we stay away from it? For starters, coverage purchased through your employer tends to have a higher premium than individual term life insurance policies. Yes, a huge benefit to the employer policy is guaranteed coverage, but because of that, insurance companies know they are covering a higher level of risk, and the premiums reflect that. Individual insurance policies don’t inflate your rate by forcing you to subsidize high-risk individuals.

Something else to consider before purchasing employer supplemental life insurance coverage is that the rates are often age-banded as an additional means of mitigating risk. Policy holders pay a certain rate based on their five to ten-year age range, and the premiums can dramatically increase simply because you’re a year older. The benefit of an individual term life insurance policy over the employer plan is that it locks in your rate for the duration of the policy. Listen to this episode for more reasons to avoid employer supplemental life insurance and potential alternatives!

Resources Mentioned

• Policygenius

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