Many of us receive our life insurance through our employers, and it’s often cheaper that way. But there may be reasons to buy supplemental life insurance. Here are three:
It may not be sufficient
First, your employer may not offer enough life insurance to meet your needs. If your death would be a financial burden on your loved ones, experts often recommend you obtain coverage worth five to ten times your annual salary. And be sure you include supplemental income, such as bonuses and commissions, in your calculations of your annual salary; they count.
It may not be portable
Second, you could lose your coverage. When you change jobs, you typically lose your life insurance coverage; if you are going to a new job, it may offer coverage, but it may not be as good. This lack of portability is particularly problematic as we age, because as older workers we’re less likely to be able to qualify for an individual life insurance policy. And even if we are able to, it might be very expensive. As well, it’s always a possibility that your employer might stop offering life insurance to save money, leaving you without coverage.
Finally, with employer-sponsored life insurance, you don’t get to choose the provider. It’s possible that the insurance carrier your company has chosen is rated lower than you’d like, risking the possibility the insurance you paid for won’t be there when you need it. Your carrier’s A.M. Best rating will tell you whether it’s financially stable or not.
While it’s certainly wise to take advantage of the free or inexpensive life insurance offered by your employer, you may want to supplement it with insurance from other sources. Ensure you purchase when you’re younger and it’s less expensive, and buy sufficient supplemental insurance to ensure you’re covered in all eventualities, including job loss and declining health.