Term Life Insurance from Employer: Gaps and Considerations

The life insurance provided by an employer is called group life insurance. It covers all employees under one policy, and the cost is based on the group’s average age and gender mix. Employees usually don’t need to take a medical test. The coverage often ends when you leave the company, but some plans allow you to continue it on your own.

In this article, we will look at some important facts and common gaps in employer-provided group life insurance. Do not get me wrong. Everyone should take advantage of their company’s group plan. It is affordable, easy to qualify for, and often covers pre-existing conditions. However, it is also important to know what it does not cover. Understanding those limits help you see the gaps and plan for extra personal coverage.

Here are a few situations group life insurance may not offer coverage:

• Personal travel outside the country
• Break between jobs
• Living Benefits
• Disability protection

Personal travel outside the country

The USA is a country of immigrants. It is common for many to travel back home to visit family and extended family. These trips often last from a couple of weeks to months. When we travel internationally, the risk of illness increases due to changes in weather, food, water, and environment. Some employer-sponsored group life insurance plans may have limits on coverage during extended personal travel or stays outside the United States. It is always best to confirm the details with your HR department or the insurance provider.

Break between jobs

When we switch jobs, there may be a gap between the last working day at the old job and the joining date at the new one. This gap could be planned or unplanned. Many people use this time to travel or handle personal matters that have been on hold.

Think about the recent layoffs in the tech industry. Losing a job often means losing not just income but also life insurance. Some companies offer the option to convert your group life insurance to an individual policy when you leave, but the rates offered through this path are often not favorable.

Living Benefits

In a life insurance policy, if you need to choose only one rider (additional benefit), it should be the Accelerated Death Benefit (ADB) rider. The ADB rider may cover terminal, chronic, and critical illnesses, depending on the policy. Employer-provided group insurance normally includes only terminal illness coverage. It often misses chronic and critical illness coverage. Chronic and critical illness coverage allows the insured to withdraw a portion of the death benefit if diagnosed with a serious health event such as a heart attack or cancer.

Disability coverage

Group life insurance does not cover disability. Employers usually offer separate short term disability (STD) and long term disability (LTD) plans to provide income replacement if you cannot work due to illness or injury. Short term disability generally replaces about 60 percent of your base pay for a few months, while long term disability begins after the short term coverage ends and can continue for several years or until retirement age. These benefits often have monthly caps and may end when your employment ends.

With personal term life insurance, you can add a waiver of premium or disability income rider to strengthen your protection. The waiver of premium rider ensures your policy stays active without paying premiums if you become disabled. A disability income rider can provide monthly payments to help replace lost income. These options give you more control and continuous coverage that is not tied to your job.

Concluding thoughts

In addition to employer provided group insurance, you should have outside coverage as well. A personal policy can be tailored to your specific needs. You can add useful riders such as accelerated death benefit, disability income, longterm care, premium wavier ... etc.

Take a close look at your assets and liabilities. Find the gaps that could leave your family vulnerable. If your loved ones would struggle without your income, now is the time to protect them by transferring that risk to an insurance company. Insurers can handle that risk because only a few policyholders ever need to make a claim. For your family, that protection can make all the difference. Secure their future today. Hope for the best and prepare for the worst.

That’s a wrap for this week. Happy learning!