You may be interested in getting life insurance, or maybe you want to make sure that what you have is enough. But where to start? Understanding your options can go a long way to ensuring that you have the right type and amount of coverage—and that it’s there when you need it.
A good step is to look at what your employer may have in place. Employers may offer life insurance coverage as an employee benefit. This is called group coverage and is usually equal to one or two times your salary or a lump sum.
While that sounds like a lot of money, you’ll need to ask yourself if your partner or family would be OK financially with just a year or two of a financial cushion. If you have a stay-at-home partner, keep in mind that they may also have to spend time looking for a job, and then most likely pay for help with things that they previously took care of, such as childcare.
Group coverage typically ends when your job does. Or if it is the type you can convert to permanent insurance and take with you, it can be prohibitively expensive to do so.
Another way to get coverage through an employer is called voluntary coverage. Unlike group coverage, which your employer pays for, you pay the full premium. There are several things that make this coverage attractive: ease of getting coverage (you are often asked few or no medical questions) and ease of payment (the premium is typically deducted from your paycheck). This is a good way to get coverage if you have health issues that would prevent you from getting an individual policy, or being able to afford it given your health condition.
Unlike group coverage, this is an individual policy, so you own it and can take it with you, at no additional cost. Once you leave your job, however, you would be responsible for making the premium payments directly to the insurance company.
Your employer may or may not offer this type of coverage, so be sure to check with your benefits manager to see if they offer a life insurance benefit, and if so, what it entails.
Life insurance through work is a great benefit to have, and can act as a good starting place for you. However, the total amount of coverage you can get through work will most likely fall short of what you need if you have people who depend on you financially. As a very general rule of thumb, eight to 10 times your salary is a good starting place for the amount of recommended life insurance coverage. Do a quick calculation to find out how much you might need with this easy Needs Analysis Calculator.
An individual life insurance policy is one you own, and will be with you through the term of the policy, or if you’ve purchased a permanent policy—for your lifetime, as long as you continue to pay the premiums.
A final note, a life insurance professional can help you sort through your options and perhaps with a combination of the above, help you apply for coverage fit for your needs.
As your life progresses, converting your life insurance policy is something that you may consider.
If you’re hesitating about getting life insurance—here are eight reasons to do it today.
Be sure to "kick the tires" before you purchase.