Should I Buy More Life Insurance From My Employer or Elsewhere?

Suzanna De Baca -- Expert Business Source, 4/18/2007 6:31:00 AM

Dear Suzanna:

I work for a medium sized company that offers group life insurance. I am covered for the amount of my salary at my employer’s expense but I’m about to get married and want to increase my coverage. I can do this through work, but would have to pay for the additional amount.  Is it better for me to get the additional insurance from my employer or buy a policy elsewhere?

From – “Cost-conscious”

Dear Cost Conscious:

Congratulations on your impending marriage and good for you for doing some financial planning in advance!  When considering the purchase of additional life insurance, there are several factors to consider and cost is just one of them.

If you can elect to purchase supplemental insurance through your group policy at work, chances are that it will be your cheapest and perhaps easiest option.  Depending on the amount of additional coverage you want, you may not even have to show proof of insurability, i.e., a doctor’s statement that you are still healthy.  Your HR director can tell you whether you will be required to do a medical exam or provide doctor’s information. 

Be aware, however, that group insurance is a type of term insurance, which means that you will paying out for the supplemental coverage in exchange for a death benefit, but you will not accrue any cash value.  While the premium for whole life or other permanent type of policy might be more expensive, your dollars will be adding up over time.  Depending on your financial goals for the future, a permanent policy may be an attractive option for you.

Another consideration is the portability of the group policy.  Most group policies cover you while you are at that employer, but the coverage ends if you go to another company. 

Lastly, purchasing additional life insurance isn’t an either/or situation.  You can have more than one policy and more than one type.  You could purchase additional group coverage through work and still look at outside policies that would give you permanent coverage and help you with accumulation goals.

Speak with your HR director to fully understand the details of your work policy and consult with your financial advisor to determine how much and what types of life insurance are the most appropriate for you at this point in your life.

Suzanna de Baca is President of Private Capital Solutions Group.  She is a Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS), 7 Hanover Square, New York, NY 10004, (888) 600-4667.  Securities products/services and advisory services are offered through PAS, a registered broker/dealer and investment advisor. Private Capital Solutions Group is not an affiliate or subsidiary of PAS.
PAS is a member NASD, SIPC.

Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal or investment advice. Although the information has been gathered from sources believed reliable, please note that individual situations can vary, therefore the information should be relied upon when coordinated with individual professional advice.