Options exist outside of your employer for life insurance benefits
Life insurance is a subject many people avoid talking about. We don’t like thinking about our own death, no matter how important. Furthermore, we prefer to avoid the admin surrounding it. Many companies require you to get an insurance medical exam before pricing your premiums, and few people enjoy being assessed this way.
But avoiding confronting the topic of life insurance can lead to problems for your loved ones. Having a cushion to fall back on when losing their loved one is crucial, especially if you are the primary breadwinner.
If you are working a full-time job, chances are your employer has included life insurance in your employment package. Every month, a portion of your salary goes to this expense.
But is it enough? Should you get your own life insurance policy to supplement what your company is giving you or is that a waste of finances?
Here are the reasons to consider getting your own life insurance policy.
1. Your employer underinsured you
Many companies choose to provide low-cost life insurance. They insure you for an amount that may seem substantial on the surface, but in context is actually very low. This brings into question how much life insurance you should take out in the first place.
Experts advise that you get at least six times your annual salary. Some believe you should go for as much as twelve times your salary. It obviously depends on your circumstances. If you have a working spouse and no children, a huge payout is not strictly necessary. But if you have a number of dependents, a mortgage, and a stay-at-home spouse, you will need to leave a lot of money behind to keep them solvent for the foreseeable future.
Find out how much your employer has insured you for. Also consider, when comparing it to your annual salary, that the base salary amount does not include bonuses, which you may not realize contribute significantly to your family’s standard of life.
2. You don’t want to be dependent on your employer
Another reason to get your own life insurance is that you don’t want to be entirely dependent on your employer for cover. If you only have employer-provided coverage, you can lose your coverage if you change jobs or get laid off. You can even lose coverage if they decide to change your job status to part-time, or simply decide to no longer provide coverage as a benefit.
This reality becomes particularly stark if you have to stop working due to illness. Losing your life insurance at this moment can be devastating to your family’s financial situation. While it may be possible to convert to a new policy, you don’t want to risk being left with no coverage at all.
3. Your employer does not cover your spouse
The breadwinner of a family often assumes that they are the only one who needs life insurance. Your stay-at-home spouse may not seem like an important candidate, considering they do not bring in any income in the first place. As such, you may not be concerned that your employer-provided coverage does not cover your spouse.
However, this can be a bad mistake to make. There are reasons your spouse should be covered even if they don’t earn income. For one thing, you will need to take some time off if something happens to them, and a payout can facilitate this without leaving your family to struggle with your loss of income.
But more importantly, a stay-at-home spouse brings a lot of value to the household which, when quantified, is worth an awful lot of money. Some experts calculate the value of a stay-at-home spouse as equivalent to over $160,000 per annum!
This is because they do important household jobs as well as providing childcare. Paying someone else to take care of these things will be unaffordable. Taking time off work to do the jobs your spouse was doing will lessen your income significantly.
4. Value for money
In some cases, your employer will go with the cheapest life insurance option that does not cover enough. In other cases, they may pay too much for too little. They go with whatever company is affiliated to or partnered with them. When you do your own research, however, you find that the value for money is just not there.
Instead of letting your employer take out a significant chunk of your income for inferior life insurance, getting your own life insurance can save you money while providing more benefits.
Of course, not all employers will be willing to let you decline life insurance as part of your package, even if you find your own alternatives. However, it is a good idea to look at what is available and speak to your employer if you find something better.
Supplementing your life insurance
In most cases, the solution will be to supplement your employer-provided life insurance with an extra policy. This policy should cover the extra funds your family will need in case of your death. It should cover your spouse if they are not covered and will remain in place even if you change jobs or are laid off.
Life insurance is not a great topic of discussion, but it plays an incredibly important role in taking care of your family if something happens to you. Take a close look at your employer-provided life insurance policy to see if you need to get supplemental coverage.