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The Pitfalls Of Work Sponsored Life Insurance

As a life insurance agent, it is common to hear the misconception that people "think" they are fully covered and have adequate coverage with their work sponsored life insurance their employer pays for. Unfortunately this could not be further from the truth. Although employer sponsored life insurance is inexpensive and coverage is guaranteed to a certain limit, but it is not something that can be counted on or relied on to take care of your family.



Typically, it’s a small policy of $10,000 or equivalent to 1 years’ salary, which as you can imagine it will not go far. Life insurance is the most important purchase you make in your life if you have a family that relies on your income. Listed below are some of the pitfalls of work sponsored life insurance:



The Death Benefit Is Not Enough For Your Family

Generally, there are limits on the amount of coverage that can be purchased. The amount of coverage is usually based on your income. In some cases, you can purchase additional coverage up to three to six times your salary, but that may require a medical exam. Some professionals recommend a person carry as much as twelve times their salary, so life insurance provided by your employer falls way short of that figure.



The exact amount of coverage needed varies from person to person and the exact plan varies as well. Imagine having a family and your salary is $50,000 - you owe $200,000 on your mortgage and bills and you die with $50,000 of life insurance....how long will that help your family?



If you are single, have no children, no mortgage and have no assets with a co-signer, then employer sponsored life insurance may be enough coverage for you. However, when 1 of 2 Americans needs some type of healthcare needs in their life, some policies have living benefits which give you money while you are alive if you have a terminal, chronic or critical illness. Your work related will not typically have these benefits.




When You Leave Your Job, You Lose Your Coverage

People frequently experience the loss of health insurance and the same generally applies to life insurance when you lose your job or decide to leave. Not having any life insurance during this time could be detrimental to your family, should something happen to you. How many jobs have you had over the last 10, 15 or 20 years? Believing your "never going to leave" your current employer is not realistic.



Also, if during this gap you are diagnosed with a critical or terminal illness, you may become uninsurable. This is just another critical aspect to consider. Most work life insurance policies lack a convertibility option, but even when that is an option, the new policy is based on your current age and risk class at that time and premiums will reflect such.



The Premiums Are Usually Alot More Expensive

Depending on the plans offered by the employer, the policy's premiums may not be the best available for you. Most employer sponsored life insurance plans usually have an increasing premium that will occur in 5 year increments. If you are healthy and insurable, seeking personal life insurance is worth looking into to protect yourself and your family. Just as you do with most other things you purchase and considering how important life insurance is, you should make sure you are getting the most coverage possible for the best possible price.


It is always important to make sure you meet with a qualified licensed life insurance professional to determine what options are available for you. Contact us to schedule a consultation with us today!

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