An employer that offers a great benefits package is usually one reason you seek employment with them. Affording any kind of insurance these days is a stretch for many families and individuals. While employee-sponsored plans are often valuable, life insurance works differently than health insurance benefits. It’s important to understand that you may be paying more than your bargained for through your employers.
If you opt to buy term life insurance through your employer, you may be surprised to find out it may not be the best option for you. You should consider purchasing the insurance on your own through a third-party for a number of reasons.
Why It Doesn’t Make Sense
If you get insurance through your employer, you are likely to be paying much more than you should have to for insurance. It is a misconception that the group insurance provided through your employer is the least expensive than if you bought it on your own.
There are some benefits to employer’s group insurance. Health, disability, and long term car insurance are usually cheaper when purchased as part of a group plan. If your employer is offering a benefits package that includes life insurance in addition to these benefits, you absolutely should take it.
However, life insurance is different. Unlike other insurance types, life insurance policy premiums have been on the decline in the last two years for individual policies. This is not the case with group life coverage which has stayed the same in price over the last decade. The coverage provided by your employer may be costing you much more (sometimes even double the amount) than if you were to purchase life insurance on your own.
Other Reasons Life Insurance Costs More Through Employers
In addition to the stability of employer group insurance costs, there are other reasons group life insurance costs more. Employers purchase coverage for a group of individuals with varying health issues, lifestyle habits, and ages. The premium for insurance is then based on averages. Comparably the group is less healthy than individuals.
Another factor to consider is renewal requirements. As groups age, group life insurance typically renew every three years if not more frequently. At the time of renewal, rates on group policies can increase. Individual life insurance policies have fixed rates so they will never change throughout the period of coverage.
Downside to Group Plans
In the event you choose to leave your current employers, understand that not all insurance providers offer a provision to convert the group policy into an individual one. Some companies will allow this but the new individual policy will likely be much more expensive than if you had bought an individual policy on your own.
If you are relatively healthy and are looking for life insurance coverage, research a variety of insurance providers and policy quotes before considering buying insurance solely through your employer. You’ll likely get a much better deal on your own if you do the legwork to find the right company and life insurance policy for you.