Some companies offer life and disability insurance to their employees as well as other perks. The question is: "Should one just get it at work our purchase one from a broker?" We will discuss disability insurance in another article. For now, we will focus on life insurance.
Life insurance through work is very convenient. It requires very little to no underwriting, easy to pay through salary deduction and in some instances, could be the only option if you are unable to get insurance directly from carriers because of major health or lifestyle reasons. Some of the downsides are: work-related restrictions such as you need to be actively at work for the benefits to pay, and it is not portable so when you retire, get fired or quit your job, it also goes away.
In addition, the benefits offered through work insurance lack the ability to add important riders or options to the policy as well as the flexibility to customize the design to your goals and needs. Benefits are based on salary so the more you make, the more you could get and vice versa.
From a premium standpoint, work insurance policies are usually better for those unable to get a good rate using individual insurance policies because of major health issues. However, the health issues must be really major before the work insurance premiums could beat the individual policy premiums. Additionally, most work insurance premiums also increase as you age.
The two types of work (group) life insurance are basic and supplemental. Basic is guaranteed coverage and paid for by the employer. Supplemental is paid for by the employee through paycheck deductions, requires minimal underwriting and is in addition to the basic coverage offered by the employer.
Individual policies purchased through a licensed insurance advisors or directly from an insurance company outside of the workplace have one major inconvenience: the underwriting process. The underwriting process takes anywhere from a day to 90 days to take place. It requires the proposed insured to give health, financial and lifestyle information and in some cases, even go through an insurance physical or have a blood/urine test completed. This could be very uncomfortable for some people.
Nowadays, if a person is healthy, have a good family history and a pretty "boring" lifestyle, the accelerated underwriting process is the way to go. It allows for lab-free underwriting as well as decisions to be reached within minutes or hours. A great insurance advisor should know when and when not to use accelerated underwriting outside of the health parameters. Products and case design must also be taken into consideration when considering the use of these programs.
The "prize" for insureds going through underwriting is usually better premiums especially if their health ranges from great to average. From there, premiums could be designed to stay level for the desired number of years. Products could also be customized with riders for family, long term care, disability and other benefits that could be beneficial to the insured. The policy design could also be tailored to the insureds goals and needs.
My rule of thumb is to always take advantage of the free "Basic" employer-provided coverage. Then, determine how much life insurance is needed. For working clients who are healthy and need more insurance, going with individual life insurance (& underwriting) is almost always the best way to get lower premiums. Those with significant medical history, I like to compare how much it would cost for an individual life insurance policy versus the group life. Which means, employees with significant medical conditions should ask their HR department for the "price" of any supplemental coverage available to them. Then, this amount should be compared to the least expensive premium you could get in the individual marketplace at that time.
It is always in the client's best interest to "benchmark and compare multiple quotes from different insurance companies" and not just run one insurance company's numbers. Additionally, a great insurance advisor should be able to explain the various convertibility features and riders as well as the actual contract language pertaining to such. Last but not the least, an insurance advisor who acts as a fiduciary must do a thorough field underwriting to ensure that the client's unique health and lifestyle circumstances are matched with the right carrier strengths. Therefore, acquiring the most competitive premium available to the client.
Do you have insurance at work and need more information? Want to learn more about this topic? email me at firstname.lastname@example.org.
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