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Life Insurance: Is Your Work Policy Enough?

May 29, 2012

Life insurance is one of those things people don’t like to think about. Many people feel they don’t have to worry about it; after all, their employer is providing a policy, so why pay for one elsewhere? Choosing to count on a life insurance policy from your employer can be a costly mistake. There are limitations to such policies that you should be aware of, before buying a policy on your own becomes an expensive proposition.

Life Insurance at Work

Many employers offer a life insurance policy as part of your benefits package. It’s a great way to get some coverage, but it has its limits. First of all, it’s important to be aware of how much the policy pays out if you pass away. In some cases, it’s one year’s salary. Some places may offer two years or more, but that’s unusual. Is that enough money to take care of your debts, provide for your family, and handle final expenses? For the average person, the answer is no.

Perhaps the biggest down side to life insurance through your employer is that you only have that coverage for as long as you are employed there. If you move to a new job or retire, you will likely lose that coverage. That leaves you with nothing. If you wait until that happens to seek out another policy, you are likely to pay more for it since you are now older and may have more health problems.

Life insurance through your employer is best seen as an added coverage that can supplement the life insurance you purchase for yourself. Even with a very good policy provided at work, it makes sense to have more coverage elsewhere.

The Benefits of Buying Now

Life insurance premiums are based on the risk level that the insurance company takes on by insuring you. That means that if you are young and healthy you are a good risk for the company since you’re unlikely to die any time soon. The older you get, however, the more likely you will start to see health problems and the more of a risk you represent to the company. That means that as you age, your premiums will go up.

Anyone can be diagnosed with a serious illness at any time or any age. You could go in for a check-up tomorrow and find out you have an illness. At that point, you will find it’s nearly impossible to qualify for life insurance. You won’t be able to leave the kind of support to your family that they need. Hesitating to buy life insurance could mean you can’t get it at all down the line, at any premium.

Life Insurance Options

When you choose to purchase your own life insurance policy you can select the type of policy and how much coverage you want to carry. Life insurance policies through work are generally chosen for you and don’t come with much in the way of options.

Both term and whole life policies are available to you, allowing you to create a comprehensive coverage package that provides for your needs today and for the needs you foresee in the future. Most people need more life insurance coverage during the years when they have a mortgage and have young children living at home. After that time, while you still need life insurance, your needs decline somewhat. This is most often the time when people are depending on their work policy, and the time when they most need additional coverage.

Term life insurance policies are designed to offer large amounts of coverage for a specific period of time. You can take out a large policy that covers your mortgage and provides for your family and pay for it only during the time you need it. Many people choose to combine this with a universal or whole life insurance policy that lasts throughout your life. When the term expires and the work coverage is gone, you will still have a policy to fall back on, with a low premium locked in for the duration.

The Right Life Insurance for You

Life insurance needs are personal. That’s why it’s best to sit down and discuss them with an insurance professional who can help you calculate your needs and guide you in choosing the right coverage. When it comes to life insurance, you should see your work policy as a part of the big picture; the combination of coverage that has been created to suit your particular needs.

Counting on your work life insurance alone could leave the people who depend on you without the financial means to keep their home or their lifestyle, or even to handle your debts and final expenses. Accept that work policy gratefully if it’s offered but don’t depend on it alone.