I have a life insurance policy from work, do I need my own?
Answers | 4
When your life insurance is part of the employment benefit, the coverage ends when you leave the job. That coverage is part of a group policy and is not an individual policy that YOU own. It is also important to be able to discuss your particular needs as they will change as your life and family changes.
Life Insurance is purchased to take care of your expenses and those you love after you are gone. It is often purchased to provide security for those dependent on the wage earner should they die while the family is still young. The proceeds can be used to provide housing and education. If there is a “stay at home” parent, that parent also needs life insurance. How can you pay to replace their services if they die?
It is always wise to purchase a policy from an independent agent so you own the coverage and it can be based on your personal needs. When you are healthy and younger you can purchase a higher value life insurance policy and lock in a lower cost for the term you choose. Your health and smoking habit will affect the cost. Based on the type of policy, amount of coverage, your age and health status, a physical exam may be required and the company will provide that.
Some people choose “Whole Life” insurance while many others choose “Term Life”. Whole life is a permanent policy that is more costly but it will accumulate some “cash value” and continues as long as you pay the annual premium. A “Term Life” insurance policy is one that you purchase for a set number of years. It ends when you stop paying or the term expires. You can then purchase another term policy but the cost will be based on your age and health at that time.
Some options are: 5-Year Term; 10-Year Term; 20-Year Term and even 30-Year Term. This product is desirable as a lower cost product that can purchase high limits and the rate is locked in for a certain number of years. It is used to provide a greater amount of coverage for a set number of years. It is an excellent way to purchase high amounts of affordable insurance while your children are growing up and you have an outstanding mortgage.
Sometimes term insurance is used after a divorce and is purchased to provide protection until the youngest child is 18 or 21. Sometimes life insurance is purchased as part of a business relationship to provide “Key-man” coverage or to protect business partners.
Never purchase “mortgage” insurance from the bank or mortgage company where you obtain your mortgage. Two important reasons not to purchase it from the lender is: 1) The insurance they provide is called “Decreasing Term” insurance which means the original amount is based on your loan and the coverage decreases each year as your loan amount goes down. The price does not go down; you pay the same every year even though the coverage is less. 2) The bank is always the beneficiary, not your family! If you die, the bank gets the money, the loan is paid and your family does not receive anything money.
You can always check with the Division of Insurance in whatever state you live in. Most of them have websites that also offer you some information about the companies that are licensed in your state.
Also if you are healthy, you can find much better coverage for the cost. If your health is poor, work sponsored insurance may be the best thing going for you.