by | Apr 3, 2023 | Wealth Management

Some companies offer group life insurance in employee benefits packages. This lets employees get coverage through their work for free or at a low cost and with no medical exam. However, many employees may need more than this coverage. For example, people often need enough life insurance so their loved ones can replace multiple years of their income and pay off debts. Unfortunately, according to Forbes, employers tend not to offer more than $50,000 in coverage for tax reasons.

That said, you can get an individual life insurance policy outside work to make up for the coverage shortfall. First, this article will explain how getting group life insurance works, then dive into four reasons why you should consider buying an individual life insurance policy outside of work.

How does getting group life insurance work?

Getting coverage through your employer’s group life policy is much like getting any other benefit. When you start working for the company and enrol in benefits, you can elect to get coverage. Typically no medical exams are required. This can be a big benefit if you consider a medical exam to be inconvenient or invasive.

Reasons to consider an individual life insurance policy outside of work

Here are several reasons to consider getting an individual life insurance policy outside of your group life insurance coverage:

You can get more coverage

Many employers cap coverage at $50,000 per employee for tax reasons discussed earlier. However, that’s generally not enough for many people if their loved ones need to cover more than a few final expenses. 

Individual life insurance policies let you get much more coverage. For example, many insurers offer death benefits up to $1 million and more. That helps your loved ones replace your income, pay off your debts, pay for your kid’s college education, and cover other expenses.

Group life insurance doesn’t come with you if you change jobs

Group life insurance often doesn’t follow you if you leave the company. This can leave you without coverage at a critical time if you change jobs, get laid off, or retire. Plus, if you get a new job, you might have to wait through a probationary period before signing up for the new group policy.

Individual life insurance policies stay with you no matter what as long you keep up on premiums and meet the other terms. As a result, your loved ones won’t lose financial protection in between jobs or after retirement.

You can build additional wealth

If you’ve maxed out your workplace retirement plan or hit your matching bonus, permanent life policies outside of work offer additional wealth-building opportunities through cash value.

Your cash value grows with every premium payment. You can borrow against it or withdraw from it when you accumulate enough. If you no longer need your policy, you can surrender it and receive the cash value minus surrender charges.

No-exam options are available

If you want to skip the medical exam, there are several individual life policy options that don’t require one. Here are a few types of life insurance with no medical exam:

  • Final expense insurance: These are small whole life policies designed to cover funeral costs, medical bills, and other final expenses. They typically come with low premiums, a small death benefit, and cash value.
  • Simplified issue life insurance: These policies streamline the application process and have no medical exam to help you get coverage quickly. They have low premiums, a lower death benefit payout for beneficiaries, and a cash value component.
  • Guaranteed issue life insurance: These policies do not deny any applicants. They also come with affordable premiums, a lower death benefit, and cash value. Guaranteed issue life insurance may also have one to two-year lockout periods. If you pass away during this period, your loved ones receive a refund of premiums but no death benefit.

Bottom line

Group life insurance is easy to enroll in, cheap to maintain, and requires no medical exam. However, you may need to get an individual life insurance policy to supplement it. Individual life insurance policies can offer far more coverage than group life insurance, and they stay with you if you leave your job.

Furthermore, permanent life insurance policies help you potentially build more wealth through cash value. No-exam individual policies are available as well. All that said, shop for multiple quotes when looking for individual life insurance. This will help you find affordable rates for the coverage you need.

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