Beginning in October each year many companies offer employees an opportunity enroll or re-enroll in various benefit programs. These often include heath insurance, dental insurance, life
insurance, and investment programs.
Group term life insurance is often provide by the company with the option to increase coverage if desired, provided the employee pays for the increased coverage. Many take advantage of this opportunity for two reasons. First, in most cases, there is little to no underwriting. There are no nurses or needles or seemingly endless medical questions. Second, the process is easy and the money comes out of your paycheck.
What you may not realize about group term life insurance is that it can often be extremely expensive compared to a personally owned policy. I've personally seen coverage costing nearly double that of a personally owned policy.
The reason for this is simple. The insurance company that is providing the benefits has to account for all the people who may be obtaining the insurance from the super health individual to the very unhealthy. So you may be super healthy but since everyone is grouped together, you have to pay the same premiums as someone who is living a very unhealthy lifestyle. The insurance company has to pad the premiums for this factor.
In most cases a personally owned policy is a better option because it is less expensive. In addition, the policy is designed for your individual situation taking into account your personal financial goals and needs.
Let's look at a few more advantages of personally owning your life insurance policy.
Group term life insurance is often provide by the company with the option to increase coverage if desired, provided the employee pays for the increased coverage. Many take advantage of this opportunity for two reasons. First, in most cases, there is little to no underwriting. There are no nurses or needles or seemingly endless medical questions. Second, the process is easy and the money comes out of your paycheck.
What you may not realize about group term life insurance is that it can often be extremely expensive compared to a personally owned policy. I've personally seen coverage costing nearly double that of a personally owned policy.
The reason for this is simple. The insurance company that is providing the benefits has to account for all the people who may be obtaining the insurance from the super health individual to the very unhealthy. So you may be super healthy but since everyone is grouped together, you have to pay the same premiums as someone who is living a very unhealthy lifestyle. The insurance company has to pad the premiums for this factor.
In most cases a personally owned policy is a better option because it is less expensive. In addition, the policy is designed for your individual situation taking into account your personal financial goals and needs.
Let's look at a few more advantages of personally owning your life insurance policy.
- Taxation - Group term life insurance is often taxable if it is provided by the employer and exceeds $50,000 of coverage. Personally owned life insurance proceeds are generally distributed to the beneficiaries income-tax free. See IRS details.
- Portability - Group term life insurance coverage often ends when the employee leaves the employer. The employee may be able to retain the coverage if converted to a permanent policy. These permanent policies are often base models with no riders or benefits attached. Personally owned life insurance coverage is owned by the owner or insured and is completely portable. Conversion privileges are often included and at the health rating of the individual when originally purchased.
- Riders - Most group term life insurance policies do not offer riders to the insured. Personally owned life insurance policies may include a number of riders (accidental death, waiver of premium, charitable riders, child riders, accelerated benefits, and more.) Many of these riders are very inexpensive or free.
- Disposable - One of the biggest drawbacks of group term life insurance is that it is a benefit provided by the company. This means that there is always the possibility that this benefit could be done away with. Personally owned life insurance cannot be cancelled except by the insured/owner. It can be cancelled by the insurer but only for lack of payment.
Group term life insurance is a great option for those who are not healthy. It's also a great benefit if it's free. Otherwise, you would do well to consider owning your own life insurance. Your family's financial well being is too important to leave to chance.
Have you already enrolled? No worries, you can always drop that coverage once you have your own personally owned life insurance policy in place.
Let's start a conversation about insuring your love and supporting your Catholic community!
Phone: 740-324-0702
Email: hahnjamesm@gmail.com
"When considering purchasing Life Insurance from an agent - service, knowledge, and reputation is just as important price."
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