Is Your Group Basic Life Insurance Coverage Enough?

Oct 08, 2013

This is a good question and one that all employees should visit from time to time.

A life insurance policy pays a cash benefit, tax free, to your beneficiaries if you die while insured. Your employee benefit plan likely has a Basic Life insurance component of $25,000 or perhaps one times your salary. It’s important that you are aware how that plays into your financial planning in the event of your death.

What are you hoping your insurance will provide for your family? Some people just want enough to cover their funeral costs and final taxes. Others want enough to pay off their mortgage or to cover some of the living expenses of dependents or to pay for their children’s post secondary education. The amount will obviously vary from person to person but it can be surprisingly large.

For Example, a married couple with 2 small children with a $200,000 mortgage and regular monthly expenses (child care, groceries, car loan) and a desire to pay for college will require $700,000 to provide for a modest lifestyle.

In addition to Group Basic Life Insurance, Group Optional Life insurance may be available through your employer’s Group benefit program. It provides additional coverage above and beyond your Basic Life insurance, and both policies can be converted to an Individual policy if you leave your employer. In general, Group Basic Life insurance can be considered a form of temporary insurance offered by your employer to assist beneficiaries with final expenses and beginning life without the insured.

Employees tend to change employers multiple times in their careers, and since the amount of coverage can vary greatly from employer to employer, you shouldn’t count on the Group Basic Life coverage to be enough or even available. Combining this coverage with Optional Group Life and/or Individual Life insurance makes sense when deciding the total coverage required to meet your family’s insurance needs.

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