Thursday, June 16, 2022

Is Supplemental Life Insurance Worth It

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What Is Group Life Insurance

Is Supplemental Insurance Worth Keeping?

Group life insurance is what youd call a life insurance policy if you got it through your employer. This life insurance is bought a company or organization and then offered up to its employees.;

If youve opted in for this life insurance at work, it usually wont cost you anything ;

Thats the good news. The not-so-good news is that your death benefit with basic group life insurance is pretty low. Why? These company group plans usually only cover a few times your salary at best, which is nowhere near what we say you should aim for. We recommend getting a plan thats 1012 times your annual income.;

Lets put it this way: If youre earning $50,000 a year and youre only covered for $100,000 when you die, thats not enough to provide for your family for much time. Think about your lost income, mortgage repayments, education for the kids, and other big expenses!;

Enter a slick insurance rep at work, eager to tell you the supplemental life insurance you could do with.;

Supplemental Policies Purchased Through Employers Are Non

Most employer-sponsored insurance policies will not come with you when you move on to a different employer, when you are fired, or when you retire.;

If you opted to receive an employer-sponsored insurance policy, find out if you can pay an amount to let you carry your benefits wherever you go. If there is none and you are not sure you will stay with that one employer, then consider a private policy.;

Advantages And Disadvantages Of Group Life Insurance

The biggest appeal group life insurance has for employees is its value for money. Group members typically pay very little, if anything at all. Any premiums are drawn directly from their weekly or monthly gross earnings. Qualifying for group policies is easy, with coverage guaranteed to all group members. Unlike with individual policies, group insurance doesnt require a medical exam.

However, low cost and convenience arent everything. Group life insurance generally comes with only basic coverage, which means it may not fulfill the needs of policyholders. Typical amounts are $20,000, $50,000, or one or two times the insureds annual salary. Thats why experts say it should be treated as a perk and supplemented with a separate individual policy, rather than being seen as sufficient standalone coverage.

Another drawback is that the employer controls the policy, which means your premiums can increase based on decisions that your employer makes. If an organization opts to terminate group life insuranceor a person decides to switch jobscoverage usually stops. However, the former employee does have an option to continue coverage at the individual level. This means the policy is converted from a group life policy to an individual one, which comes with higher premiums. While many people may not want the greater cost, those who are otherwise uninsurable will benefit from the conversion, as a medical exam still would not be required.

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Is Life Insurance A Smart Investment

Using permanent life insurance as an investment might make sense for certain high-net-worth individuals looking to minimize estate taxes. But for the average person, buying term and investing the difference is usually the better option.

Even if you’re purchasing life insurance primarily for investing purposes, it’s still important to research the best life insurance companies to ensure you’re getting the most beneficial policy possible.

Employer Supplemental Insurance Has Limitations

What is Supplemental Life Insurance?

Consumers often purchase supplemental insurance through their employers. One advantage of doing so is that the employee bypasses the medical exam that a private insurer would require. However, employer-sponsored supplemental insurance may have limitations, so it is important to research the coverage carefully. First, the coverage may be a form of accidental death and dismemberment insurance, which only pays the beneficiaries if the employee dies from an accident or loses a limb, hearing or sight as a result of an accident. Second, the employer-sponsored coverage may be a form of a burial insurance policy. In this case, the insurance only covers the funeral and burial costs of the employee and may have a limit of between $5,000 and $10,000. Finally, and perhaps most importantly, most employer-sponsored supplemental plans are not portable. Therefore, if the employee leaves his or her job voluntarily or is terminated, the coverage is terminated, and that person would have to apply for coverage at a new job, or through a private company.

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What Is Supplemental Life Insurance And Is It Worth The Cost

Abby Hayes |

Modified date: Jun. 10, 2021

Editor’s note –

Imagine you just landed a great new job. Youre really pumped for the first day of work. You put on your brand new suit, pick up your swanky briefcase, and head to the officeonly to sit in onboarding meetings for the whole first day.

These meetings can be boring, and they can take forever if your new employer is large and onboards many employees at once. Typically, they go over things like employment expectations and requirements. But theyll also usually walk you through the employers various benefits package options.

Many times, youre left with lots of choices at the end of onboarding, including:

Weve talked elsewhere on Dough Roller about the first three options. But now, lets focus on the fourth option: Whether or not to purchase supplemental life insurance.

You might be thinking, What is supplemental life insurance? Were here with answers. First, lets discuss what this type of insurance is, and then well talk about whether or not its worth the cost.

    Do You Need Portable Coverage

    One more thing about supplemental life insurance: If you decide to purchase it, be sure to check whether you can take the policy with you if you leave or lose your job.

    If you want life insurance in place for a particular amount of time , irrespective of your employment situation, its something to consider. On the other hand, if you buy your own term life insurance policy, it goes where you go, and keeps protecting your family even if you change employers .

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    Plan For The Unthinkable And Get Peace Of Mind

    Nobody wants to think of the disasters that could lie ahead, but its prudent to make a plan, just in case. Even if you dont think youll need Supplemental insurance, it can pay off if the unthinkable were to happen. Not only would you get the peace of mind and financial protection, but youd also be able to focus on what matters most: getting better.

    So this open enrollment, consider what youre buying with those low monthly premiums. Pay a little now, and save yourself a lot of headaches later.

    This informational material shall not be considered financial advice. The Hartford assumes no responsibility for any financial, investment, or tax-related decisions. Those seeking resolution of specific financial, legal, tax, or business issues, questions, or concerns regarding this topic should consult their own financial, investment, tax, legal, or other business consultants, advisors, or other professionals.

    Supplemental Insurance Can Be A Sidekick To Traditional Health Insurance

    Is Life Insurance Worth It?

    Supplemental insurance coverage isnt comprehensive; its designed to work alongside and cover the gaps left behind by a typical health-insurance policy. This is accomplished by paying benefits directly to you, giving you a buffer to overcome the potential financial burdens of an unexpected hospital stay, illness or accident.

    The time you spend in the hospital, or simply ill at home, may also result in lost wages. You might have travel costs from plane tickets or hotel lodging if you have to travel far to be seen by a specialist or to undergo surgery in a hospital known for its specialization in your condition. These costs are often covered under a supplemental insurance policy in the form of monetary assistance. For example, cancer insurance and critical-illness supplemental insurance pay out a cash benefit in the event youre diagnosed with cancer or suffer a heart attack or stroke.

    There are also supplemental insurance products designed to cover more than a typical insurance policy.

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    Ad&d: Accidental Death And Dismemberment

    This accidental death and dismemberment policy covers you if you lose a limb or die accidentally ;

    If you already have a life insurance policy that covers accidental death, death by disease, death by chocolate, whatever kind of death you can come up with, why would you need additional coverage for an accidental death?;

    Hint: You dont. Not only are these policies cheap, theyre also worthless because of the long list of conditions the insurance company says it wont payout for. Buyer beware: The devil is in the details, and AD&D policies are chock-full of those details!;

    And dont be fooled into AD&D even if the insurance rep says youre covered if you dont die but just lose a limb or something. If you have long-term disability insurance in placeand we hope you do because its just as important as getting term life insuranceyoud be covered for income lost because of an injury or disability anyway. ;;

    How much long-term disability insurance do you need? We say get as much coverage as you canaround 6070% of your income. Because this is the amount of your salary you bring home on a normal day

    What Is Supplemental Life Insurance And Should You Get It

    I have seen and read about many individuals who left behind their families in dismay because they did not make the proper contingencies, such as investing in a life insurance policy while they were alive.;;

    They leave behind so many obligations and debt, in addition to the emotional burden and stress from paying off those dues.;

    All of which could be avoided had they paid premiums for a life insurance plan.;

    You should not think that life insurance is just another expense; it is an investment.;

    If you are married and have children, your family will depend on your income. If you dont have children but live with a partner, then that partner depends on you for your share of household bills and expenses.;

    Your family members will surely grieve your loss, and not having enough money to cover financial obligations makes the situation worse. There is just this harrowing feeling of what will happen.;

    And contrary to the belief of many, life insurance is more affordable than they think.;

    Once you have life insurance, bolster your coverage through opting into a supplemental life insurance package.

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    What Does It Mean To Port A Group Life Insurance Policy

    If you have group life insurance through an employer, the insurance is likely job-dependent. If you leave the job youll generally lose the group life insurance. But sometimes you can port the workplace insurance, which allows you to continue buying the group life insurance after youve left the job.

    For example, you might be offered portability if your employment is being terminated.

    Term Life May Not Be Sufficient

    What is Supplemental Life Insurance and is it Worth the ...

    Most consumers purchase one of two types of life insuranceterm life insurance or whole life insurance. With term life insurance, the insured receives coverage for a set period, which is known as the term of the insurance policy. Both employers and private companies offer term insurance. Since the coverage only applies during a set period, term life insurance generally costs less than whole life insurance, which covers an individual for their entire life.

    One major problem with term life insurance is that most policyholders rely on their employer for this insurance, and as a result, they may not have enough coverage. About three in 10 people have life insurance through their employer, according to an early 2020 survey conducted by the Life Insurance and Market Research Association . A 2015 study by LMRA found that 65% of employees with employer-sponsored group life insurance believed that they needed more insurance than their employer provided. A typical employer plan provides coverage equal to one to two times the employee’s annual salary. For example, an employee making $60,000 annually may receive a $120,000 policy at no cost. For a single employee or an employee with one dependent, this may be adequate. However, an employee with a bigger family may require several times that amount of coverage to take care of a spouse or children if they unexpectedly die. Supplemental insurance can fill in the gaps of an employer-sponsored plan.

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    Who Should Get Supplemental Life Insurance

    Financial experts recommend having life insurance worth about 10-12 times your income, so the policies that are part of your benefits package are usually not enough, even with supplements.;

    Premiums to buy sufficient coverage as part of a group plan are usually much higher than if you bought it privately.

    Its not as good of deal as it would be if you are willing to go through the medical exams and the extensive questionnaires that you would have to go through for conventional life insurance purchase, Weisbart says.

    Employer-based supplemental life insurance is best for people who:

    • Have pre-existing health conditions that might prevent them from being able to get insurance on the open market.;
    • Cant purchase individual term life insurance because of age, smoking, dangerous hobbies or other issues.
    • Find premiums are too expensive on the open market.
    • Want a quick payout for burial and funeral costs.;

    People who do not smoke, have no pre-existing conditions, and are young can easily find lower rates for less-restrictive term life policies on the private market.;

    The vast majority of people can buy individual life insurance, its only five or at the most 10% of the market that gets rejected, Weisbart explains. And the great majority of those can buy it preferred rates.

    How Much Voluntary Life Insurance Do I Need

    Especially since maximum coverage amounts for voluntary life insurance vary wildly among employers and insurance companies.

    For example, under The Hartfords voluntary life insurance plan, the guarantee issue ranges between $100,000 and $250,000 , with a guarantee issue maximum of $50,000 for your spouse and $10,000 for your dependent child.;

    But if you work for The Scripps Research Institute, with a spouse, you can seek up to $500,000 during the open enrollment period. However, the guarantee issue is only up to $50,000.

    So, the question youll want to ask is whether the guarantee issue will suffice, or if you foresee any additional expenses down the road that may warrant going above the guarantee issue.

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    Group Life Insurance Policy Options

    NYL GBS Voluntary Term Life

    Plans are tailored to meet employers needs with a choice of basic or voluntary term life coverage, or a combination of the two.

    NYL GBS Universal Life

    Insurance combines;the protection;of life insurance with;an option to build savings.

    Our holistic, customer-centered approach to group life insurance provides value for both you and your employees:


    Common Types Of Supplemental Insurance


    Although Medigap is a common form of supplemental medical coverage, it’s only available to Americans who have Original Medicare coverage.

    There are many other types of supplemental health coverage that are available to people who have other types of health insurance. Your employer may offer them as a voluntary benefit, or you can purchase one directly from an insurance company.

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    What Is Supplemental Insurance

    Medical insurance is designed to pay for the costs of medical care.; Supplemental insurance products insure against a variety of other risks and are designed to be purchased in addition to medical, not to replace it.

    Supplemental insurance works a little differently than a regular Health plan, and thats a good thing.;You still pay a monthly premium , and Supplemental plans still provide payments via claims.

    Supplemental insurance is less complicated with the exception of Dental or Vision plans ,you wont have to worry about things like coinsurance, deductibles, copays or networks.

    Do I Need Supplemental Health Insurance

    Whether you need this type of health plan depends on your risk factors. You should also think about the cost of the premiums, how much insurance you want to carry, and what you want to be insured for. You may decide that a dental plan is worth buying if you think that your children will need it to cover;orthodontic care in the coming years.

    You might think about a supplemental plan if you know that you couldn’t afford the costs of long-term care, or the loss of income if you were diagnosed with something like cancer. Long-term care or critical illness plans may be worth thinking about in these cases.;

    Your savings should play a key role in your decision to purchase a supplemental health plan. Would you have enough money to cover your deductible, copays, and coinsurance if you were in the hospital for a few weeks or even more? Do you have money that you can access because you’ve been saving to an HSA or FSA? Buying a supplemental health plan might not be worth it if you do.

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    Permanent Life Insurance Example

    What if the same woman described above had bought permanent life insurance instead? For a whole life insurance policy from the same insurance company, she could expect to pay $9,370 annually. So how much cash value would she build up for that extra cost?

    • After five years, the policys guaranteed cash value is $19,880, and she will have paid $46,850 in premiums.
    • After 10 years, the policys guaranteed cash value is $65,630, and she will have paid $93,700 in premiums.
    • After 20 years, the policys guaranteed cash value is $181,630, and she will have paid $187,400 in premiums.

    But after 20 years, if she had bought term for $480 a year and invested the $8,890 difference, at an average annual return of 8%, she would have $421,064 before taxes.

    “Sure,” you say, “but the permanent life insurance policy guarantees its return. I’m not guaranteed an 8% return in the market.” That’s true. But even if the woman described above had put the extra $8,890 a year in a savings account with 1% interest, she would have $196,425 after 20 years, which is still more than the permanent policy’s guaranteed cash value of $181,630.

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