Does Your Job Include Life Insurance? Make Sure It's Enough.

Many companies offer a small life insurance policy as part of their benefits package. There are several hidden benefits associated with this great perk.

· Opting in is convenient and straightforward.

· Your employer shares or covers the premiums, allowing you to save money.

· Acceptance is typically guaranteed, regardless of your current medical condition.

· If you must watch your pennies closely, employer-provided life insurance lets you inexpensively ensure the welfare of dependents who survive you.

However, while some companies offer significant self-purchase policies at group rates, coverage might be insufficient. So, knowing how much coverage you need is crucial whether you’re adding to a company policy or purchasing independently.

The acronym D.I.M.E. is a helpful tool:

· Debt — This is everything you make payments on except your mortgage.

· Income replacement — If you are your family’s primary breadwinner, life insurance can satisfy your family’s financial needs if you die. Investors recommend purchasing coverage for ten times the amount you bring home. For example, if you make $60,000 a year, you’d need a $600,000 life insurance policy. Your family can then invest the policy in a stock or mutual fund and potentially earn a 10% return.

· Mortgage — Your insurance policy should cover the remainder of your house payments.

· Education — If you have children, life insurance should cover the future cost of their college tuition.

Using the D.I.M.E. method, you can estimate the coverage your family needs. Periodic reevaluations of this figure are essential – particularly after significant life changes. From time to time, your coverage may need to change. Apart from any tweaks you add over time, your initial coverage estimate may be surprising, leading you to beef up your “benefit” life insurance policy with an independent policy.

For this purpose, the most affordable option is term insurance. Term policies are typically 15-year, 20-year, or 30-year policies with low monthly premiums. Paying a low premium lets you invest any extra income in a solid savings plan with a high return rate, enabling you to still provide for your loved ones if your policy “times out” before you die. While you can purchase another term policy at that point, your coverage needs may differ, and your premiums may be higher.

The alternative to term insurance is whole life insurance. These policies are more costly than term coverage since part of your monthly premium funds a “savings plan.” This plan builds cash value for your policy. However, this concept of building cash value is overly optimistic since the return rate on your savings is usually very low—less than 2%. Plus, pulling money out of your “savings” may result in penalties.

When looking at life insurance, first get a handle on your coverage needs. Then check with your company and see what they offer. Also, check if you can purchase a more comprehensive policy at a group rate. Finally, if the projected coverage limits still fall short of your estimate, consider additional coverage options elsewhere. Planning your life insurance strategy today can significantly impact your family’s future.

At Career Concepts, we care about making sure our candidates and clients find the right jobs. We genuinely want the best for everyone involved! With over 50 years of experience, we can help you, too! Contact us today!