How Life Insurance Independent of Your Employer Puts You In Control
When you start a new job or need to select company insurance benefits during open enrollment, you’re given a menu of options, such as dental, vision, disability, and life insurance. While opting for life insurance is pretty much a no-brainer, assessing your needs and reading the fine print can be flat-out daunting.
It’s tough to focus on future needs when current bills and student loan payments loom. We get it. And it’s even tougher to think about the end of your life when you’re so focused on living it to the max. But making sure you not only have life insurance, but also have the right amount is part of adulting—a very important part, especially if you have or are considering a family.
While most Americans (60%) have either individual life insurance or group life insurance through their employer (per Life Happens), 1 in 3 households would have immediate trouble paying living expenses given the loss of the primary wage earner. And for those households, that struggle could throw a wrench into long-term family goals.
Whether you have insurance through your job, or are only now considering it, padding that protection with a little more, especially while you’re still young, is a savvy financial move. And often, financial savviness means planning for the unexpected and thinking about the big picture.
With insights from the latest research, as well as from SoFi’s resident life insurance expert and VP of Finance Andrea Blankmeyer, here’s what you need to know about employer-provided group life insurance plans to determine the right course of action.
Employer Life Insurance Lowdown
While opting for life insurance through your employer is better than not having life insurance at all, you need to understand the terms of the policy.
The death benefit could be small or limited. Most group life insurance policies limit benefit payouts, and in most cases this may only be equal to one year of your annual salary. For a single software developer earning $85,000 a year, for example, that benefit amount won’t come close to the amount of money needed once a mortgage, spouse, children, and childcare are added to the equation.
“While the industry recommends that you multiply your income by 7 to 10 years, that doesn’t take into account your complete financial picture,” says Blankmeyer. “The employer usually pays for most or, in some cases, 100% of the premium, but the benefit often caps at one year of the employee’s full time salary. And that’s not ideal for an executive making $125,000 a year, or more. But the good news is that the younger you are, the more affordable the premiums typically are.”
For example, a 28-year-old male lawyer and parent living in Florida who is in excellent health will pay $36.06 a month for a 20-year/$1 million life insurance policy offered by SoFi’s partner Ladder vs. paying as high as $47.25 a month for the same policy from carriers on PolicyGenius.
Discuss the exact amount of your benefit, what’s covered, and any policy limitations with your HR rep, and then assess your true needs using the SoFi Calculator.
If you leave your job, you may lose your coverage. Job hopping is standard for millennials with career goals. As of January 2016, employees aged 25 to 34 had worked for their current employers for only 2.8 years (median), according to new data from the U.S. Bureau of Labor Statistics. No surprise there. Workers who plan on leaving could find out that their employer-provided group life insurance policies are not portable. In other words, they may lose their life insurance benefits upon leaving.
Remember, too, that if your employer benefits aren’t transferable, your reason for leaving won’t matter. For example, if you are forced to quit your job due to serious illness, you’ll lose your life insurance benefit when you need it the most.
“You really want a policy that sticks to you—one that isn’t dependent on your employer,” says Blankmeyer. “Having life insurance that’s tied to you offers peace of mind that no matter what happens, your family is covered.”
Group life insurance is not designed around your investing plans. When reviewing any life insurance policy, you must think big picture: Take into account your mortgage balance, all other debt, the amount of income replacement your family will need, future college tuition for your children, and your current savings and investments balances. Crunch those numbers and you might quickly find that you need 5 to 10 times more coverage than your employer-provided policy offers.
If your employer-provided group coverage is subpar, selecting a policy independent of that puts you in control of your family’s financial future. In fact many individuals often take out policies in addition to their employer’s coverage; a term referred to as “bridging” your policies. In this case you choose the term and the coverage amount to fit your individual needs, and the policy stays with you, regardless of a job change.
Our recent collaboration with Ladder allows our members to get term life insurance built from the ground to be instant, simple, and smart.. Our integration makes it easy for you to apply online in about five minutes for instant coverage* at reasonable rates.
* Coverage amounts range from $100k to $8 million. Instant coverage is available to applicants who meet certain risk and eligibility requirements. A medical test may be required for applicants that do not meet these eligibility criteria.
Ladder offers term policies in New York (policy form # MN-26) that are issued by Allianz Life Insurance Company of New York. Term policies are issued in all other states and DC by Fidelity Security Life Insurance Company, Kansas City, MO (policy form No. ICC17-M-1069 and M-1069). Coverage and pricing is subject to eligibility and underwriting criteria. SoFi Agency and its affiliates do not guarantee the services of any insurance company. The California license number for SoFi Agency is 0L13077. Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other. Social Finance, Inc. (SoFi) and Social Finance Life Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under LadderLifeTM policies.Ladder policies are issued in New York by Allianz Life Insurance Company of New York, New York, NY (Policy form # MN-26) and in all other states and DC by Allianz Life Insurance Company of North America, Minneapolis, MN (Policy form # ICC20P-AZ100 and # P-AZ100). Only Allianz Life Insurance Company of New York is authorized to offer life insurance in the state of New York. Coverage and pricing is subject to eligibility and underwriting criteria. SoFi Agency and its affiliates do not guarantee the services of any insurance company. The California license number for SoFi Agency is 0L13077 and for Ladder is OK22568. Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other. Social Finance, Inc. (SoFi) and Social Finance Life Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under LadderLifeTM policies. SoFi is compensated by Ladder for each issued term life policy. SoFi offers customers the opportunity to reach Ladder Insurance Services, LLC to obtain information about estate planning documents such as wills. Social Finance, Inc. (“SoFi”) will be paid a marketing fee by Ladder when customers make a purchase through this link. All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal advice.