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3 Disadvantages of Getting Life Insurance Through Work

3 Disadvantages of Getting Life Insurance Through Work

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Generally speaking, the details of a life insurance policy are easy to grasp. When searching for life insurance, you shop around and enroll for the policy that best suits your needs. If you pass away while your policy is active, your heirs will collect a death benefit. You will likely need to pay more premiums to obtain a larger life insurance payout for your family.

These days, it’s common for companies to provide their employees with free life insurance. These plans are paid for by employers and are commonly known as basic group life insurance. In contrast, group insurance coverage is typically solely offered by employers and may restrict coverage choices.

Recent research by the Life Insurance Marketing & Research Association found that more Americans were protected by these types of plans through their employers than through individual policies.

If you just started a new career or it’s open registration time, you might be able to obtain life insurance via your employer for little to no cost. But is it wise to purchase group life insurance? Here is a list of the benefits and drawbacks of obtaining insurance through your place of employment.

Cons Of Getting Employer Life Insurance


First of all, each group plan offers a different level of coverage. The top limit can occasionally be $50,000. Sometimes the cap is five times your yearly salary. Do not forget that 1 in 4 households think that group life insurance provided by their employer is sufficient.

A modest coverage offered by your group plan ought to be adequate if you’re unmarried and don’t have any children. If your partner or children rely on your employment, you must consider these drawbacks.

Typically, a person needs life insurance equal to about ten times their yearly salary. The general rule of thumb doesn’t seem to apply to everyone, but it demonstrates that two or five times your salary isn’t enough. Relying solely on a group life insurance plan typically leaves you underinsured.

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You Don’t Own It

You don’t actually own the policy you’re covered by under the group plan, so it doesn’t matter how good the coverage is. Problems may arise if you lose your work or switch careers and find that your new employer does not provide adequate life insurance.

If you’re otherwise healthy and able to purchase your life insurance, this shouldn’t be too much of an issue. But if you later acquired a health problem, you might be denied coverage or have to pay more than what you would have paid had you filed when you were fairly young and healthy.

To explain, assume that you wish to launch a business but are hampered by a health issue, like arthritis or diabetes. Considering your medical status, you know it would be quite expensive to purchase individual life insurance. This may influence whether or not you choose to establish your own company or join a startup.

Choices Are Limited

Employer-provided life insurance is primarily term-life insurance since businesses rarely deal with more than a single insurer. As a result, you won’t be able to choose from the same variety of policies as you would in other contexts. You should talk to a financial consultant if you want a more comprehensive insurance policy, such as permanent  or universal life.


Which Is Better – Employer Life Insurance Or Personalized Life Insurance?

Our findings show that it’s not wise to put all of your eggs into the group life insurance basket. Group life insurance may give you false peace of mind if you have a family that relies on your salary. If you’re healthy, you should compare estimates for inexpensive term insurance. Even if you’re not in the best of health, it’s still important to consider your choices.

A group life insurance may appear more attractive in the short term. However, future expenses must be taken into account. It’s also important to consider the prospect of losing your work and your group health insurance with it. Franklin Life & Annuity might be an invaluable resource if you’re looking for assistance in weighing alternatives.

Franklin Life & Annuity is one of the best companies that offer life insurance in Houston, Texas. We have helped thousands of people secure their families financially, thanks to our comprehensive family life insurance Houston Texas and final expense insurance in Houston, Texas. Call us today, and we’ll help you find better coverage options than your employer!

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