'Tis The Season For Open Enrollment.
At a Labor Day BBQ I attended, one friend said her company had taken the unusual step of boosting employee benefits, rather than cutting them back the way most companies have. In addition to offering low deductibles on their medical insurance offerings, they will pay for life insurance for all employees up to two-and-a-half times their earnings.
I was happy for her – free is good. But I also reminded her of the advice I give all my clients, which is that if you really need life insurance, I’d prefer that you be in control of it, rather than relying on your employer.
The reasoning is very simple – your employer can change,
often against your will – and you don’t want to find yourself without the
critical insurance you need. And unfortunately you usually can’t take your life
insurance with you the way you can your medical insurance through COBRA. Some
companies will allow you to swap your group term coverage for a more expensive
cash-balance type of policy, but most won’t.
Worse yet, your health can change in a way that could make
you uninsurable. This is less likely with life insurance than with disability,
but it can happen. (Life insurers have found ways to insurance most people’s
lives, at a price).
So take a few minutes now to ask yourself the big question –
what do I want to have in place for my loved ones if I die? Many people want to
have sufficient funds to have a surviving spouse stay home and finish raising
the children, to pay for college and pay off the mortgage.
Add that all up and then subtract what you already own and
will leave for them. Be sure to remember the benefits they will receive from
such sources as Social Security (you do file those Benefits Estimate Statements
you receive annually, right?). It will pay a benefit to your surviving minor
children until they turn 18, and will also provide a benefit to the surviving
parent until the youngest child turns 16, but there are restrictions on how
much that parent can earn.
If you need additional funds, I urge you to consult an
independent insurance broker to discuss buying your own life insurance (and
check with your attorney to determine whether a trust should own the policy). I
recommend a broker over a do-it-yourself internet search because a broker can
work with your medical history to find you insurers who will be sure to say yes
to your application. I am also a big fan of term insurance, because it
typically allows you to buy the most benefit for the least amount of money.
Of course, a financial planner can help with the estimate of how much you’ll need, and can also help you find the right resource to purchase the policy.
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