Many of us sign on all the papers we get during our induction procedure about life insurance policy and forget all about it. We assume that we are insured and our employer has actually provided us with the protection we need. WRONG! Many times we fail to understand the group benefits our employer provides us with and integrate it with our overall financial condition.
Group insurance is a small benefit provided by your employer at no cost. It is basically a base plan which you can avail in addition to the life cover you already have or plan to have. When I was offered a term insurance plan by my employer, I didn’t feel the need to explore further and felt assured that I am fully insured and have secured my family’s future. I was wrong and thankfully I am alive to correct my mistakes and share my experience.
When your company offers you term insurance
When your company offers you term insurance as part of employee benefits, most of your insurance premiums and in some cases all of them are taken care of by your employer. This is a great way of securing your family’s future. However, if that is the only policy you are holding or are planning to hold, you are in deep trouble. Let me tell you how.
#1. You get a coverage typically equal to two times your annual salary
Well,that is a good start for anyone. However, if you plan to retain that as the only life insurance policy, it might not suffice. The cover you need for your family to lead a life with dignity and pay off any personal debts and educational expenses, you would require something more than what your employer provides you. Also, these term insurance only provide basic coverage and requires supplement plans for specific purposes not covered in the original plan.
#2. Coverage Portability
This is something which often slips our mind. The group term insurance is valid only till you are employed with the company. There are certain insurance providers that allow you easy portability of your group insurance into individual policy. This can be done only post your tenure your employer comes to an end. But, it still requires a lot of underwriting and is a complex procedure and might prove to be more expensive. In such cases, you might have to let go of the plan altogether.
#3. Higher Premiums
These group insurance plans are cheaper when one is young. Butas you grow older, the cost of premium increases. It also increases drastically when the number of participants decreases. This is because in group plans if there are 10 participants,not everyone will be old or unhealthy. So the premium paid by a healthy participant would help in subsidising that of an unhealthy older participant who would otherwise be charged higher in an individual plan.
In my case, after working for 10 years in a company when I planned to shift my organisation, my insurance provider gave me the option of either quitting the policy or paying a high premium price. I ended up losing all the premiums paid.
#5. Policy Ownership
This I find to be the most compelling point everyone should pay heed to. Life insurance is a very important investment. So who should control it? While we are happy when our employers pay our premiums and give us life cover, one must sit and ponder about its ownership aspect as well.
The biggest disadvantage of an employer-sponsored group term policy is that the company owns your policy and can choose to alter or terminate it whenever it feels like. When I had to quit my job, all I could see is, my family being left unprotected until I buy another term insurance policy.This is a bigger problem in case you are suddenly diagnosed with some health condition which makes it difficult for you to get insured at an affordable cost.
Term Insurance is a huge responsibility towards your family and should never be left at the mercy of your employers. While it is perfectly fine to accept that benefit which your employer provides, you must definitely have a backup policy to support your family.