Group insurance (or employer-offered life insurance) is a free option given to employees by several employers. While it’s free money in the eventuality of something happening to you, group life insurance shouldn’t be your only coverage.
Why group life insurance isn’t enough
Although a $25,000-$50,000 check seems like a lot of money for single people, in most cases, it’s not. The actual expenses may be a lot more than you think. As per estimates, the median price of funerals alone is approximately $7,000.
If you have private student loans, car loans, or mortgage against your name, they’re likely to have a cosigner. In the event of your passing, your cosigner must bear the burden of paying off the debt. You can avoid this by either refinancing your loan and removing your cosigner, or buying a life insurance policy that can cover the rest of the debt.
For young and healthy individuals, not a lot of coverage is required, so they can purchase term life insurance at lower rates (could be even $20 per month). Individuals with spouses and/or children would need more coverage. In this case, to get an estimate of the total expenses, calculate the following:
- Funeral cost,
- Future college costs or other expenses related to children,
- The cost of any debt which must be repaid even upon the borrower’s death,
- The time you want your family to have to grieve your loss without having to worry about an income.
How you can get more coverage
In addition to your group life insurance, consider getting supplemental life insurance individually as well. In many cases, your employer can offer you supplemental life insurance. Purchasing this supplemental insurance from your employer can prove to be more affordable than buying it from other sources.
However, remember, it is technically your company that owns the policy. If you quit your job or are fired, you lose your group life insurance too. Some employers offer an option of letting the individuals continue their policy, but at a higher price. You can continue to have your supplemental term life insurance even after changing jobs. The best time to get a low premium on your policy is when you are young and healthy.
All in all, while having group life insurance is a great perk, it is not enough, and you should consider other options.