Jul 23, 2020 4 min read

Every life insurance agent I have ever talk to will list the number one reason people give for not purchasing their own life insurance is,I have it through work. They also will tell you when they ask their clients a few questions about their work life insurance rarely do they get an answers. Questions like how much insurance do you have through work, does it continue after you retire, what will it cost to continue when you retire, can you continue the policy if you change jobs, does it continue if you are laid off or on workman’s compensation, does it provide a death benefit no matter how you die.

Life insurance provided through work commonly referred to as group insurance can be a valuable benefit for an employee. Usually it is a term policy purchased on all the employees of the employer. The death benefit provided usual depends on what class employee you are, with the higher income employees getting a larger death benefit. It can provide a death benefit based on salary, one or two years of your salary or a flat amount based again on your job class. Knowing the exact amount you are provided is important for you to plan for your family’s security. Remember the average family of four needs at least five years of salary in the event of the death of their income provider.

Why would you want the policy to continue when you retire? Hopefully when you retire you have accumulated enough money to live the rest of your life. But remember it is retirement money and life expectancy has increased. Retirement money was designed to provide care for you and in some situations disappears at your death. If you have a concern on who will pay for your internment and have a desire to leave a legacy to your family life insurance is the only way.

What will it cost to continue when you retire is also important. You have benefited with group insurance because the risk is being shared by all your fellow employees. Now you must pay based on your age and because of that the cost may eat into your retirement money. Simply speaking a 40 year old will pay half as much as a 65 year old for the same policy.

What if it doesn’t continue when you change jobs. According to a January 2018 report from the bureau of Labor statistics, the average person changes jobs ten to fifteen times during his or her career. Many workers spend five years or less in every job. What if the new job has great pay but no benefits. What if your health has changed and getting your own life insurance could be difficult and expensive? Do you want to remain in a job you do not like because you need the benefits? Owning your own policies makes job changing easier.

Being laid off has not been as great of a concern in my life time as it is this year. Many if not all employers end benefits when they lay someone off. You may collect unemployment but your family will still need the benefit of your life insurance. Having to purchase it now while waiting to go back to work or finding a new job again exposes you to health concerns and expense.

Being hurt on the job and going on workman’s compensation also may be a concern. Does your life insurance benefit continue ? If you own your own policy it can pay for itself if you have add wavier of premium for disability (WPD).

Lastly does your group insurance cover any way you may die ? I have had customers bring in policies that only provide death benefits if they die accidentally or while traveling on public transportation.

Life insurance at work is an important benefit. Knowing all the conditions of the policy is important. It cannot replace the benefits of owning your own policy. Like always get as much information from your employer on the policy and review it with your life insurance agent. Early planning will save you money and protect your families security.

Bob Hollick is a State Farm Insurance agent based in Washington. His column now will appear every other Thursday in the Observer- Reporter.

To submit columns on financial planning, investing or business-related matters, email Rick Shrum at rshrum@observer-reporter.com.