Tell me something, are you a part of the work force in the United States? If you’re like the vast majority of Americans, you probably depend on some employer or have depended on some company for your livelihood. There’s no shame in that. I have and continue to depend on an employer to put food on the table as well. Also like most Americans, I would assume that if you lost your job, you wouldn’t be able to survive for very long without a steady income coming in. This is also quite normal. In fact, if reports are to be believed, nearly two-thirds of all Americans are living paycheck to paycheck.
Unfortunately, our dependence on our employers goes beyond our weekly, bi-weekly or monthly paycheck. A large percentage of us also depend on our employers for our health care as well. According to a study by the Kaiser Family Foundation (KFF), more than 156 million Americans, about 49 percent of the population, receives health care benefits from our employers. If you’re like me, you’re probably wondering what would happen someone suddenly quit or got fired from their job. Then again, maybe not as most of us are generally only concerned with our own situation.
Of course, there is no single response to this question as every situation is different. In some cases, people may be able to hold on to their health care benefits after their employment with a specific company ends. If your employer had you covered through a group health care plan, COBRA, meaning the Consolidated Omnibus Budget Reconciliation Act, may permit you to keep your benefits when you are no longer employed with the company. You should most definitely check with the company’s human resources department to know if this applies to you.
But how does this apply to your life insurance?
I can’t tell you how many times I’ve discussed life insurance with people on the streets and on doors only to hear the popular phrase, “I have insurance with my job”. My responses and questions are always the same.
1. Do you know how much coverage you have on the job?
2. Does the employer allow you keep the life insurance plan if you leave the job?
3. It’s great that you have life insurance on the job but you should also have your own coverage.
When I respond to this phrase, often times, people usually explain that they don’t really know the details of the life insurance policy that their employer offers. My questions in fact lead many to investigate what type of coverage they actually have on the job.
And for good reason.
When considering your life insurance coverage through your employer, you need to consider several factors. While some people see insurance as just a final expense that is meant to cover the expenses of your burial in the event of death, for others, the purpose of insurance is much more. For example, for some people who are married with small children, it’s necessary to take into consideration the lives of those who you leave behind when you are no longer here.
Think about it. If you are the bread winner of the household, and you pull in, say, $100,000 a year, your family may suffer dramatically with the sudden loss of that income. If you have a mortgage on a house that costs half a million dollars, would your spouse be able to maintain the payment if you were no longer around? What if your children attended a private school? What about other household expenses, a car note, etc.? What if your spouse earned between one-fourth and half of your salary? What if he/she even earned the same amount of money? Regardless of how you look at it, losing 50-80% of any household income would probably be devastating for any family that wasn’t independently wealthy.
This is why, when considering the face value of one’s life insurance policy, many financial planners recommend that people try to get life insurance policies in which the value of the policy is anywhere from 5-10 or more times the insured person’s annual salary. The idea is to replace the loss of income so that the family left behind doesn’t suffer any financial hardships or drastic change of lifestyle. If your employer’s life insurance doesn’t provide this, your family could be left high and dry. This is one reason why you may want to consider getting your own insurance and not depend on the policy you have with your employer. But there are other reasons.
1. In some companies, if you retire or reach a certain age, you may no longer qualify for life insurance. This could be a problem as, in this situation, you could lose your insurance when you really need it.
2. You are not always guaranteed to keep your life insurance due to changes in company policy. How many times have we seen a company re-structure its business and drastically cut back on employee benefits? This could mean anything from slashes in salary, inferior health insurance plans and/or reduction of the value of life insurance policies or elimination altogether.
3. The value of the life insurance policy offered by the employer may not be enough to protect your family should you suddenly pass away.
These are just a few of the reasons you should consider getting your own life insurance completely separate from that offered on your job.
Ask yourself, are your reasons for not getting it stronger than the arguments I just presented.
Better be sure. If not, and you’re a Michigan resident, consider giving me a call.