Life Happens: Should I Have More Life Insurance than My Employe Provides?

Group Term Life Insurance - The Cherry on Top of the Sundae...You Still Need the Sundae

One of the valuable benefits employers often provide their employees is group term life insurance. The amount of life insurance benefit offered in these plans can vary, but it’s common for employees to receive only one or two times their income in group term life insurance benefit. I often hear, “I already have life insurance through my employer, so I’m all set.” Unfortunately, although this is a great employee benefit, it’s not adequate to truly protect a family. On top of that, there are additional reasons to acquire life insurance outside of an employer provided benefit. The general, and simplistic rule of thumb when determining the appropriate amount of life insurance is 10-12 times your annual income. This provides beneficiaries with enough liquidity to invest and live off the earnings for quite some time. The more complex approach, which often results in the same outcome, is taking stock of the debt you’re carrying along with education funding for children and standard of living for the surviving spouse. In addition to group life insurance typically not being a sufficient amount of coverage, there are three reasons to carry personally owned life insurance that I would like to highlight:       1. Portability. Do you want your life insurance coverage tied to your employment status?       2. Cost. For a young and healthy individual, it is often more cost effective to acquire your own life insurance than to           participate in an employer sponsored "buy up" option.       3. Flexibility. If coverage is dependent on decisions made by an employer, there isn't much flexibility and/or control over an           important financial instrument. If you are considering personally owned life insurance, or want to discuss your specific situation, I look forward to a good conversation.