More Life Insur? I have Group Term at work or do I?

When talking to my clients about increasing their life insurance coverage, I often hear: "I really don't need extra coverage.  I've got life insurance where I work".  Unfortunately, most of these prospects don't realize that group term insurance is not enough to adequately secure their family's future.  Let me explain.

Many employers provide group term life insurance in multiples of an individuals salary.  Under current tax law, face amounts above $50,000 are taxable to the employees.  That means that employees have to report income using IRS Table 1 each year and pay income taxes on that amount.  The older they get, the higher the premium reported out will be.

Premiums for group term insurance, by nature, utilize healthy employees to somewhat offset a portion of the cost of covering other employees who may have chronic conditions or unhealthy lifestyles. Costs are also kept low because most employees discontinue the coverage before they reach the point where they are most likely to die-after retirement.  Group term coverage ends at retirement or whenever the employee terminates his employment with the employer.  Of course the coverage may be converted to individual coverage, but that can be very expensive, especially at older ages. 

This is not to say that group term insurance is a bad thing. Group term provides a valuable benefit, but is should only be considered temporary insurance coverage and not the basis for a financial plan.

An individual term policy would be a better alternative.  You can save money and purchase larger face amounts, with premiums guaranteed level for up to 30 years.  And if you are in good health now, the cost for an individual policy can be lower than the reportable premium for group term.  An individual policy will allow you to guarantee your insurability in care it changes in the future.

By taking the time to talk to me about the advantages of an individual life insurance policy over group term, you will see that your group term insurance policy is just a temporary part of your overall plan.  An Individual life insurance policy can save you money and help secure your financial future, for both you and your family.