Should I get additional life insurance, if I have substantial coverage thru employer?

Question

I am in my late 20's and have 2 daughters. Thru my employer I have about $1 million group term life insurance policy plus death benefit thru vested pension plan. Should I go ahead and purchase additional term life insurance from the 3rd party or would it be the waste? I cannot afford permanent life insurance policy due to extremely high premiums.
It seems to me that I should not seek additional policy since I will always be employed and when I am unemployed I could always initiate a term policy then? What are the arguments?

Answer 1

Let's compare the two reasons

Reasons not to get your own life insurance
1) You have one through work
2) You expect to stay at that job for a very long time
3) You expect nothing will happen to the company.

Reasons to get your own life insurance
1) There's a chance that you can lose your job, so you won't be covered by life insurance anymore.
2) If you wait few years, the cost to insure you goes up.
3) Ownership of your own policy.

The questions is, are you willing to take that risk of being dependent on your employer to provide life insurance coverage? If you can afford to get your own term policy, then by all means do it. If you decide you don't want to buy your own life policy, then I suggest opening a 529 plan, which is used for higher education, for your kids. You also want to make sure your retirement needs are met. Are you on track to accumulate lots of wealth by the time you retire?

As for your pension plan, the chance of that being there when you retire is very slim. Many companies are getting rid of their pension plans because of the high cost and people living longer.

Answer 2

You should get atleast a small (10K or more) policy outside your work.

yes, you think you'll always be employed-- but stop and think about it. What if you get any kind of sickness that ultimately causes your death? Likely you'd stop working as your health dwindled-- and POOF there goes your life insurance. Not only that, but once you're diagnosed, you wouldnt' qualify for any other policies-- they ask for a health history.

At your age, a 10K policy would probably only cost a few bucks a month and would atleast cover the funeral. Anthing you can afford to buy above that is good for your children.

Don't rely just on your job. The other problem is in 10,20,30 years, a life insurance policy will be MUCH more expensive to start/buy than if you do so now.... so if you lose your job buyuing that "third party" policy will cost you much more.

Answer 3

The main argument for having another policy is that you may not always be employed by this employer - no matter what you think there is not a lot of long term security in any company anymore. If you find yourself at a small company that doesn't offer group policy or if you try to set out on your own as self-employed, you can always get a private policy then. BUT - if you should develop some kind of medical condition between now and then it might make it very hard to get a policy. I know it's hard to think about these things when you are young and healthy but it sounds like you are person who thinks ahead more than most.

Check into your alumni association, or any professional association you may be able to join because they often have group term policies too. Once you are in they can't kick you out.

Answer 4

You are still young and permanent life insurance is a sure thing. Once owned.. can not be terminated regardless of health issues that arise in the future. It can even have the premiums waived if you are injured and can not work. I used to work for State Farm and I am a firm believer in owning your own life insurance. You may change jobs later with a health problem and be limited in the amount you can purchase. Start out with a $25,000 policy. It is cheaper and you can lock it in at a rate based on your age now. The older you get the more it will cost. The policy will build cash value and even if you never change the face value as your earnings increase.. the death benefit will accrue to more than the face value at a certain age and then continue to grow after that. It will also become paid up at some point too. That means you only pay for it for so many years and then you are done and it keeps growing in value. In the later years of life it builds quite rapidly which leaves a hefty amount of money behind for your wife/children/grandchildren. Think seriously about it. Good luck! OH, and if your wife doesn't have insurance you better get her some because if she died.. who would take care of your daughters and your house how would you pay for it?

Answer 5

You should purchase a term plan which gives you lifetime coverage(i.e. up to 99-100 years old). Nobody will always be employed for a lifetime.
In the event of disability, the company might dismiss you and $1 million wouldn't be enough to cover the expenses of 3 persons.
In the event of major illnesses, expect to stop working for about 5 years. After that, some employers might not want to hire someone who's been sick before.
If you are unemployed, it may be more difficult to buy insurance as they may question your insurability, also it can become expensive.
Do not put all your eggs into one basket.

Answer 6

That is a good question. What if you were all of a sudden disabled? How long will the policy be in effect after the loss of work? Can you work long enough to be covered by medicare for being disabled. Have you worked long enough that social security benefits will provide for you and your family? You do not Know how long you will be employed (nothing is guaranteed anymore)!! Yes, you are still young, but the inevitable happens at times. Just throwing some q's back at ya. Do some research and I hope you find the right answers. God Bless

Answer 7

Work-provided life insurance ceases if you quit, or get fired. You should definitely talk to an independant insurance agent about your options. If you're in good health now, at 27, even with your family history, you may be able to get a reasonable rate. The longer you wait the higher your premiums will be. And in most cases, if you start out with a term policy now, and later on want to convert part or all to a whole life policy, most cases they can convert it without having to go through another physical or medical questions, etc. If you're at all concerned about your little girl's future (and I have no doubt you are), you'll want to get independant insurance and much more than $15,000. I'd start out looking at a $50K or $100K term policy. At your age it may not be so bad. Good luck. Hope this helped.

Answer 8

Most people don't stay with the same company to retirement anymore. The biggest argument to own your own policy is insurability. What if you were to switch jobs and the new company didn't offer any more than your salary in coverage? What if you had to leave your job due to disability, or to take care of a family member? What if you could no longer buy coverage at standard rates due to your own health?

Only you can decide if it's worth the risk. I personally will always have my own life and disability policies. Too many people in my family faced huge problems after becoming disabled - and still had to worry about their kids.

Good luck, whatever you decide!

Answer 9

YES..You should always have a permanant plan in place.I have been in business management for decades.I do not beleive that there is any stable jobs left.I have changed hands 6 times.Not just by switching companies but also on merges and buy outs.I purchased a Universal life policy many years ago from AIG and it has been awesome.I researched insurance for a long time and even though I work as a management consultant I hold an insurance lisence in my state.Universal life is flexible and can be increased in coverage and reduced in coverage as your needs change.Your premiums do change if you increase or decrease in coverage however it is permanant and dollar for dollar cheaper than whole life.There are some investors on here that will tell you buy term and invest the rest..This is good advice but you need to keep in mind why we buy insurance.We invest and save for retirement to liquidate our estate in later years.We buy insurance to preserve and build or leave an estate.The cool thing about the plan I have is that I have free riders were if I suffer a terminal,chronic or critical illness I can access my death benefit.It is more than term but I started out at $50,000 in coverage and have increased it to $250,000 as my income has grown.I Always max out the cheap insurance at work.Why not what a value.Check with your employer and see if anything you have is convertable or portable.If it is you can keep it after you leave your job.Advice=Make sure if you buy universal life that it is funded to age 100 so it will fund properly.I am sure an investment broker will tell you other wise but they get commishions on investments.My universal is paying me 5.75 guaranteed intrest for the first 10 years on any extra penny I put into my plan.It has averaged 7.33% over the last 4 years.You do get penalized if you take money out the first 20 yrs but it is guaranteed and protected tax sheltered moola.When 911 hit I lost $50,000 IN 401,MONEY MARKETS AND MUTUAL FUNDS BUT I LOST NO CASH VALUE IN MY UNIVERSAL LIFE PLAN.I beleive is diverse investing but find you an agent that knows his stuff.I try to stay away from any kind of broker because they charge for everything down to an oil change.I know my agent got a commishion on my sale but he got it once.I pay less than 1% in fees a year for the money I make on my universal life plan.

Answer 10

Your life insurance coverage sounds good..........what about your short term and long term disability? You can become unemployed due to an unexpected disability. If you can afford it I would focus in this area since you have children.