Something to Consider During Open Enrollment Period

As we approach the end of the year, companies all over the country are going through their “open enrollment” period.  This is the one time per year in which employees can select certain coverages such as health insurance, disability, long term care, and of course, group life insurance.  If the question is “Am I better off buying life insurance through my employer or on my own?”, I hope you’ll find the answer by reading below. 

First of all, the information given in this blog article is very general and your personal situation may certainly differ.  This article is meant to get you thinking (and hopefully saving $).  For a detailed analysis, please contact me. 

I’ll get the easy part out of the way.  Employers generally pay for coverage equal to 1-2x an employee’s salary.  You won’t be able to get this coverage from someone like me for free, so take it!  However, most homeowners and parents have a much larger need than that.  So if you need additional coverage, here are some things to consider when you compare “Get it from work v. Get it on my own”:

  • When you buy group insurance, you have no control over the policy.  The company can cancel it at any time.  They can also stop offering it at any time.  They own the policy.  This won’t affect you…until they stop offering it.
  • If you leave your job, you generally can’t continue your coverage.  If there is an option to “convert”, it’s usually at a much higher cost.
  • 99% of all Group life insurance I have ever seen goes up every 5 years.  The “age bands” are normally as follows:  25-29, 30-34, 35-39, 40-44, 45-49, 50-54, and so on.  (See example below)
  • Look around the office at the other folks in your age band.  You are basically sharing the risk with all of them.  If you think you’re healthier than others in your group, then you may be able to save big money by purchasing on your own.  If not, then price-wise, group insurance may be a better option.  If you are “uninsurable” and your company offers a guaranteed policy issuance option, that may be the best option for you.
  • I’ve seen group life insurance policies that only cover natural death and not accidents.  Are you kidding me?

 So here’s an example from a “group term insurance” rate sheet that I found online: a 35-year old healthy male pays for $200,000 coverage through work.  At this particular company, here is how much this man would pay annually over the next 30 years:

  • 35-39:  240/year
  • 40-44:  384/year
  • 45-49:  672/year
  • 50-54:  1176/year
  • 55-59:  1992/year (yikes)
  • 60-64:  3336/year (double yikes)

Total Paid over 30 year:  $39,000

If this same man is a non-smoker in reasonable health, he could get a 30-year policy for between 233-407/year…locked in and rate won’t change over the 30-year term.  Over 30-years, total is between $6,990 and $12,210.  Huge savings! 

Unfortunately what happens is that an employee gets a job when they’re young, doesn’t notice the small premium, and then over the years, it creeps up on them.  You may not consider yourself “young”, but I guarantee you’re a year younger now than you’ll be next year.  Do yourself a favor: look at the cost of your group life insurance this year and if you aren’t sure whether you’re getting the best short-term and long-term deal, contact me.  No charge.  Just answers.