Should I buy Group Life insurance?


I have a question for you…

Are you buying group life insurance through your employer?

If you are, there’s a very good chance that you’re probably paying too much.

Most people think that because they are buying life insurance as part of a large group plan, that they must be getting a good deal. After all, isn’t your company getting a big discount and then passing the savings on to you?

Not exactly.

You see, your insurance plan through work is a group policy. And it’s offered equally to all qualified employees.

Typically, if you are signing up for coverage during the open enrollment period then there isn’t any medical underwriting required. Anyone can get insurance.

Which means the insurance company has to price the insurance knowing that there are healthy people in the group and unhealthy people in the group.

With the exception of smokers vs non smokers, everyone pays the same rate based on their age.

So if you’re healthier than the average of the group, then chances are that your probably paying too much.

Here’s how it works…
A lot of employers provide a minimum amount of life insurance without any cost as a benefit to their employees. This could be 1 or even 2 times your base salary.

You may also be able to buy additional optional group life insurance for an out of pocket cost. This could allow you to buy up to 10 times your base salary in additional life insurance.

With the optional coverage you will pay an amount per $1,000 of insurance, usually broken down into age bands.

Something like this.

So, just like with all life insurance the older you are the more expensive it gets.

In the beginning, the cost for buying say $500,000 of life insurance is relatively small, but as you get older it gets considerably more expensive.

By the time you’re age 60 the cost is $213/mo.

when you’re age 65 it more than doubles to $430/mo.

As an example…Going with an outside insurance company, a 60 year old male in good health could get $500,000 of life insurance for about $140/month with a 10 year term policy.

As an example…Going with an outside insurance company, a 60 year old male in good health could get $500,000 of life insurance for about $140/month with a 10 year term policy.

So a little cheaper than the $213 he would be paying through the group plan. But remember, when he turns 65 his group coverage jumps to $430/mo. but his term policy remains at $140 until he turns 70.

In this example, the outside insurance saves him $21,810 over the 10 year term.

Another thing to keep in mind when buying life insurance through your companies group policy is what happens to the insurance if you leave the company or retire.

There are some plans that allow for you to keep the insurance, but it will likely come at a big increase in cost. Premiums for retirees or non employees can be 30-50% higher.

So when you’re evaluating your group life insurance here’s a few things to consider.

Request a rate sheet from your company’s benefits department so you know exactly how much your insurance costs now and in the future.

2. Think about how long you want or need the insurance coverage, and compare the total costs over the entire term you plan to keep your group policy.

3. What is the likelihood that you will leave the company? or retire? How portable is the policy and does it get more expensive.

And finally, A lot of people buy insurance through their company, but don’t really understand how it works. Before you cancel or change insurance, be sure to get all the facts. If you do change insurance don’t cancel your old policy until the new one goes into effect

That’s it for this video. Hope you got some great information here. If you would like us to run a free, no obligation quote for you on any type insurance, call our office. Even if its after hours or on the weekend you can leave a message and someone will return your call on the next business day.

3 Replies to “Should I buy Group Life insurance?”

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