These days, things are hard. Inflation, global turmoil and general uncertainty have us all considering a more defensive financial posture. From a financial perspective, insurance is a key element of your defense. At its core, insurance is all about transferring the risk associated with losses you can't afford. In that context, why would you depend entirely on your employer for life insurance? According to Forbes, that's the case for about a quarter of all Americans. What about you?
If most, or all, of your life insurance is tied to your employment, here are five questions you should ask yourself.
1. What Happens to Your Coverage When You Leave?
Last month, a GOBankingRates survey reported that nearly 60% of American workers are planning a major job change in 2024. Life insurance probably isn't a primary planning factor for these potential job movers, but it should be part of the calculus. Why? Some employer life insurance plans aren't portable, while others can only be continued by converting to a more expensive policy. Dig into the details of your employer's coverage (and prospective employer's!) before you make a move to help ensure you don't inadvertently create a coverage gap.
2. How Would You Replace It?
You can't assume a new employer will provide what you need as part of your new benefits package. Furthermore, you might not be as healthy as you once were. Health could impact your ability to buy coverage on your own or additional coverage beyond the base coverage your employer offers.
3. Is It Enough?
Free employer coverage -- typically one to two times your salary -- is often well below what your family actually needs. Putting a pen to paper, using a life insurance needs calculator or even a rule of thumb such as USAA's -- enough coverage to pay off all your debt and replace five years of income -- is a worthwhile exercise.
4. Are You Paying Too Much?
It's true that if your coverage is free, that would indicate that you're not paying too much. However, beyond the employer-provided baseline, those group rates aren't always a good deal. You may pay less by getting a policy of your own, especially if you are svelte and healthy.
5. Does a Private Policy Make Sense?
Instead of a Plan B, taking charge of your situation and buying your own life insurance coverage could be a good Plan A. And based on countless survey responses, the coverage will probably cost a lot less than you might think.
The bottom line? Life insurance is much too important to leave to the whims of your employer or the possibility that you'll change jobs. Skip renting and decide to own an individual life insurance policy that's yours, no matter what.
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