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My Employer Offers A Policy, Do I Still Need Individual Life Insurance?

My Employer Offers A Policy, Do I Still Need Individual Life Insurance?

Many employers offer life insurance to their employees. Sometimes, this coverage is free of charge and other times it is a few dollars taken from a person's paycheck. And if a person wants to insure their family, they do usually have to pay a premium out of their paycheck. There are a variety of options that are available. However, how does this compare to individual life insurance?

With individual life insurance, an individual is able to insure themselves outside of their employer. There is a reason why this may be ideal compared to employer insurance (or for people who have no employer life insurance, such as stay at home parents). There are a number of benefits to taking it upon yourself to insure your life.

Employer Insurance

Employer insurance is convenient in that you opt to have your premium taken out of your paycheck and that is it. Sometimes, the employer will have a program where they will provide you with a certain amount of insurance. Usually, this is based on income. For instance, you may make $45,000 per year and your employer says that they will insure you up to a certain number of times your income. The amount is usually two to three times your yearly income.

And just like you do with any life insurance, you specify your beneficiaries. You do have to note the policy restrictions, though. You will be given documentation on the policy, but it is not like the documentation that you receive with individual insurance. You may receive a flyer from your employer and that is it. Any questions you have regarding your policy is rather limited and requires that you call the insurer or go through your employer's human resource or personnel department.

Due to the lack of documentation, your family may not know the policy exists or how to go about making a claim. If they are not aware of any of the restrictions, they may even find it difficult obtaining the death benefit. That is why it is good to not rely solely on your employer insurance to cover you.

Individual Insurance

When you apply for individual insurance, your premium will be higher than the premium that you have to pay through your employer. This has much to do with the fact that your employer matches your premium or pays it for you completely. But you have no control over your policy.

With individual insurance, you have control. You can choose your death benefit. You obtain quotes, you compare those quotes, and you choose the policy that is right for you. You also have the option of choosing whole life insurance or term life insurance so that you have a policy that will gain cash value throughout the years. You can later borrow from that cash value if you need the cash and it also adds to your death benefit.

If whole or universal life insurance is not what you want, then you don't have to opt for it. You could choose term life insurance. You also choose your death benefit based on what you can afford. As you can see, you have complete control, which is something that your employer life insurance doesn't give you.

This is not saying to not take your employer life insurance. There is nothing that says you can't have more than one life insurance policy. You can benefit from both. However, you will know that your individual life insurance may pay faster than your employer-based life insurance, allowing your family to start paying debts and taking care of funeral costs. They don't have to wait on the money.

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