Group Life Insurance

Many employers offer group life insurance on one or all of the employee, spouse and children.

Coverage

The type of life insurance offered by employers is called term life insurance. It will pay the stated benefit if the covered person dies during the policy period.

My employers generally provided life insurance on the employee with a benefit amount equal to one year’s salary at no charge.  I was able to purchase more insurance on my life and smaller amounts on my spouse and children.

Exclusions

Group life insurance won’t provide the stated benefit if the cause of death is excluded from coverage. The most common exclusions with which I’m familiar are suicide and murder by the beneficiary.

If these nuances are important to your decision, you’ll want to ask your human resources representative what exclusions exist under your employer’s coverage. Much more importantly, if you are concerned about your mental health or your physical safety, please seek help! There are free crisis lines that will help with either issue or contact your local hospital for mental health concerns or police for safety issues.

How to Decide About Yourself

Whether to buy life insurance is often a tough decision, as we all like to think we will still be alive at the end of the year. We especially don’t want to think about what will happen if we or a loved one dies.  

With respect to your coverage level, you’ll want to think about whether you have any dependents and, if so, whether they’ll be able to sustain their current lifestyle without your income and personal expenses. If you have no dependents and very little debt, you might not need more life insurance than one times your salary.  On the other hand, if you have children, have some or a lot of debt or are barely covering your expenses, you might want to buy more life insurance to make sure there is money to pay down your debts or support your children if you die.

You’ll also want to consider the cost of the life insurance and whether it fits in your budget. For more information on budgeting, see my introductory post and nine-part series with step-by-step details to create a budget, starting with this post.  If buying life insurance means that you don’t have enough money to cover the basics, you might need to take the riskier approach and not purchase life insurance or not purchase as much.

How to Decide About Your Spouse

The considerations for insuring your spouse are similar to buying insurance for yourself.  You’ll also want to consider whether your spouse’s employer provides any life insurance and compare the face amounts offered and premiums between the two plans.

How to Decide About Your Children

The amounts of insurance available for the death of children are usually relatively low, in the range of $5,000 to $20,000.  I view the primary purpose of buying life insurance on children as covering funeral and related expenses. If you are able to afford a funeral and everyone who “should” attend can afford to do so, you are less likely to need life insurance on your children.  However, funerals and travel can be quite expensive, so life insurance on your children could cover some or all of those expenses. As always, you’ll want to evaluate whether the cost of life insurance on your children fits in your budget.

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