Do you receive life insurance through your employer? Have you wondered whether your policy is adequate enough for your needs, or if you need additional coverage on top of it? If yes, then purchasing supplemental life insurance may be a good idea.
What is supplemental life insurance?
Many employers purchase life insurance policies for their employees, and the amount is usually a few times the amount of the employee’s salary. While this type of life insurance policy may be suitable for an individual, if you have a family also relying on this policy, it may not provide adequate coverage.
This is where supplemental life insurance comes in, which some employers provide as an additional option that employees can purchase to ensure extra coverage and protection. In fact, around two-thirds of Americans rely on either their own or a family member’s supplemental life insurance purchased through work.
While your employer may provide the option of supplemental life insurance, it may not be necessary for everyone.
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Should I purchase a supplemental life insurance policy?
The answer to this question depends on a couple of factors, including whether:
1. Your family is dependent on your life insurance policy
If you have family members that you don’t want to burden with extra costs that your employer’s life insurance policy doesn’t cover, purchasing supplemental life insurance can ease these worries. Depending on the details of your employer’s life insurance plan, supplemental life insurance could cover the additional costs of a burial or circumstances like an accidental death.
On the other hand, if you have neither a spouse nor kids, and are young and relatively healthy, your employer’s life insurance policy will probably be enough to cover you on its own.
2. You’re older or have pre-existing medical conditions
Purchasing supplemental life insurance from your employer could save you money in comparison to purchasing a private life insurance policy if you’re older or have a pre-existing medical condition. This is because life insurance premiums increase as you age, and employers often receive discounted rates and pass down the savings to their employees. As well, unlike private life insurance, purchasing supplemental life insurance from your employer does not usually require a medical exam, which means that they cannot hike up your premiums due to your health or any medical conditions you have.
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Should I purchase private life insurance instead?
While supplemental life insurance certainly has its benefits, it may not be the best option for everybody. Here are some reasons why purchasing a private life insurance policy may be a better fit for you:
1. Your employer doesn’t offer life insurance
According to research conducted by the Life Insurance Marketing and Research Association, only around 48% of employers provide life insurance for their employees. This leaves more than half of the workforce without the opportunity to purchase life insurance from their employer, forcing them to find private life insurance options instead.
2. Your employer’s life insurance coverage isn’t enough
As previously mentioned, oftentimes your employer’s life insurance policy won’t be sufficient enough to adequately cover your family members. In fact, the median employer’s life insurance coverage only provides around $25,000 per employee, which is not enough if others are depending on you. While purchasing supplemental life insurance is an option, in this case, if you are young and healthy, you may be able to save more money by purchasing a private life insurance policy.
3. You plan on leaving your job
Purchasing life insurance through your employer means that your insurance is tied to your employment status. As such, whether you voluntarily quit or are fired, you will also lose your life insurance coverage. If you are not planning on staying with your current job for a long period of time, purchasing a private life insurance policy may offer you more security.
In addition, some supplemental insurance policies purchased through your employer may actually let you convert the coverage into a private, individual life insurance policy. This may be a good option if, for some reason, your life insurance coverage through your employer gets reduced or is not adequate enough for your needs. This method also does not usually require a medical exam, so this could be especially useful for those with medical conditions who would otherwise face very high premiums.
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Talk to your employer or insurance broker to figure out the best option for you
If your employer’s life insurance plan isn’t cutting it for you and you’re thinking about your options, speak to your HR manager or boss to learn more about purchasing a supplemental life insurance policy. It may also be useful to get in touch with an insurance broker, who can compare the benefits and costs of different private life insurance policies to ensure that you are getting the coverage that you need.
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