As a State Licensed Insurance Agent, I regularly hear people say “I have Life Insurance through work”.
My reply is “Great! But what if you out live your FMLA?”
Yes, it just got real, fast! I had a client in 2010 who only owned life insurance from his employer. It was the $25,000 the employer offered (not even 1 year of income). BUT…it was free. Know why work coverage is free?
It is part of a group policy so the employer gets it cheaper (less underwriting and large group paying in and employees are transient so it is less risk).
If you leave the job, the Life Insurance gets dropped (all those premiums the employer paid in were never redeemed).
EVEN IF! you come down with cancer and eventually die…the Insurance company may not have to pay. (See other problems from last week’s post)
Back to my client in 2010. Came down with cancer mid July, used 7 weeks of vaka pay, applied for FMLA (Family Medical Leave Act) and then died the end of September, just before his 54th birthday.
He was never healthy enough for his first cancer treatment. (Watch those cancer policies your employer offers, they may not pay either! My cancer policy would have paid the full lump sum in this case, hint, hint)
BUT if he had lingered on for a bit and had not continued to be considered an employee, the $25,000 would not have been paid out. His family would not have received any money from the company because he would no longer have been an employee.
Fortunately, a few years earlier, his daughter took out a small policy on him. So whether he recovered immediately or lingered, unable to work for 6 months or longer, the family would have had some insurance to help with final expenses and outstanding medical bills.
Planning is not over rated and only takes 2-4 hours out of your year!
As it was, some of the Insurance money was used to pay the mortgage so his family had a place to live (he was the only family member who was working).
While it is great when an employer offers you free Life Insurance, PLEASE do not rely on it being enough for your family.
September is Life Insurance awareness month and there are lots of great options out there, just call and I will be happy to review what might better suit your needs.