Quite often I will be discussing life insurance with someone and they will tell me that they don't need any because they have coverage through work. Given that everyone has a different situation, I ask some questions to find out how much they have and if it's enough to cover their needs.
The discussion usually turns to "Do I need to get life insurance through work?" or "Is it any good?" My general answer is that I don't know unless I take a look at it. DISCLOSURE: The information below is not specific to any industry or employer. There are too many plans out there to discuss each one in detail.
Here are some questions to ask your Human Resources person about your life insurance through work.
- What's the face amount? It can vary,with the lower end being as small as $1000 to upwards of $20,000. Or the employer may just offer the equivalent of one year's salary.
- Is it "basic" or "supplemental"? Most of the time, a "basic" policy is no charge or just very inexpensive.
- How much am I paying for it? If your policy is "supplemental", you may be paying more. One thing to be aware of is when the sales rep quotes you a price based on the frequency of your paycheck. $8 a week sounds good until you do the math and realize you are paying around $35 each month.
- Is my policy "guaranteed issue"? This means that there are no health questions. Most basic policies fall into this category.
- Is my policy "simplified issue"? This means that your policy will ask a few health questions. These may be regarded as "knockout questions", which means if you answer "yes" to one, you will be disqualified from getting the coverage.
- Is it portable? What you are trying to find out is if you can take this with you if you leave your employer. And if you can, ask if the rate will go up.
Years ago I was selling "supplemental" life insurance on the coast of South Carolina. Our polices were simplified issue and I felt that they were a bit pricey. That higher price is reflected in the minimal amount of underwriting done, giving the company a higher risk.
A young couple in Florence, SC asked me about life insurance on the husband. He was an exterminator for a local "bug company" and was being offered supplemental life insurance through his employer. The amount he wanted to purchase was going to cost him $75 each month, where I had a comparable plan for around $40. The difference in his head was that the premiums from my policy were going to be drafted from his bank account each month while the other was going to be deducted from his paycheck. He was willing to pay nearly double for the convenience of not having to worry about the money being in his account. His wife and I argued with him that he was wasting money. About a year later they split up, and she said it was because he was a "hard headed man".
Most of the time I suggest that if you can get some "basic" coverage through work, go for it. It's cheap and your family can more than likely use it if you die. With that being said, I would treat it as a secondary policy and have a primary policy outside of work. As mentioned earlier, your policy through work may or may not be portable and if you're in poor health when you leave your job, you may not qualify for another plan.
If you have questions, feel free to leave a comment or drop by our website and book an appointment for a free consultation over the phone. And as always, stay healthy!
Chris Castanes is the president of Surf Financial Brokers, helping people find affordable life and disability insurance coverage. He's also is a professional speaker helping sales people be more productive and efficient and has spoken to professional and civic organizations throughout the Southeast. And please subscribe to this blog!