It's 11:00 P.M. the night before your open enrollment, and once again you have waited until the last minute to check the boxes for next year's benefits. Every year, I help hundreds of clients review the corporate benefits they get from their company. As the booklets get larger and the benefits more complex, one of the biggest mistakes that I see employees make is not doing a shopping comparison with their voluntary group life insurance.
Remember these upcoming bullet points when it comes to viewing your company life insurance. First, there is no free lunch. Although the company may give you some life insurance that you get for no cost, if the insurance is more than $50,000 you'll get something on your pay stub called imputed income. You'll notice this if you look at your next pay stub and see GTL (group term life) as income on your paycheck. Second, when it comes to voluntary term life insurance and you choose 4x times your salary, there is actually a cost to buy this life insurance. Since term life insurance usually costs a certain amount of cents (or dollars) per $1,000 of coverage, it is important to actually analyze that amount of cost. Third, you need to see how often the cost bands change. Typically, (not in all cases) group term life insurance cost per 1,000 will go up every five years. Last, determine if the coverage is portable. Can you actually take it with you when you leave?
The analysis that is hardly even done is comparing a 20 year term insurance policy against the next 20 years of cost through the employer. Practically everybody I meet, compares today's cost per 1,000 work against outside term insurance without looking at the change in the cost bands. The failure to do a proper side by side comparison on this could leave you paying more today for the voluntary life insurance you buy at work and potentially a lot more in the future. Not to mention if your health changes and you lose your job that you may not be able to get outside insurance. Take a close look at this so you don't make the same mistake in 2015!
Written by: Ted Jenkin
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