Three Must-Knows About Corporate Life Insurance

Many large employers sponsor term life insurance as an employee benefit. Corporate sponsorship has its perks: the price is typically pretty low. It’s fairly easy to qualify for the benefit. And, the employer typically foots all or a large portion of the bill. Nonetheless, as with everything els28589664184_0f1a1e0e58_me, you get what you pay for. Here is what I see as the downside of the product.

The price goes up

Usually, the rate increases when you enter a new five-year age bracket, i.e. 30 to 34, 35 to 39, 50 to 54, 55 to 59, etc. As you get older, the percentage increase gets higher. You may get hit with a smaller increase when you’re younger, and a larger increase when you’re older. Depending on how much you are paying, and the rates for which you might qualify on the outside, a policy obtained on the open market could give you better long-term price stability than the corporate product.

It’s almost never enough coverage

The typical scenario is for a certain amount of corporate coverage to be issued on a guaranteed underwriting basis. Then, you have to be eligible for any additional amount. But these increases are underwritten on a simplified basis. It’s most often a take-you-or-leave-you decision. People who have a higher- risk factor, such as a medical condition or adventurous hobby, often do not qualify. Even if they do, there is usually a cap on how much you could buy. For most of us with multiple responsibilities and obligations, that amount is just not enough coverage.

You can’t take it with you

The corporate policy offers bargain prices (at least initially) because a large pool of people participate. It needs that pool to remain large to keep the price down. So, certain disincentives are in place to make people think twice about leaving their employer. One major disincentive is a lack of portability. If you do switch jobs, or go off on your own to start your own business, you probably can not take your coverage with you. So you are left fending for yourself in the marketplace, paying a higher price simply because you’re older. And, if you do have a higher-risk factor, that could affect the new price as well. Then again, the corporate product could be portable – if you medically qualify. Or, you may be able to take the coverage with you only if you convert it to a permanent product – which of course would cost more than the term.

Putting this all together, I find that this general rule should apply to your life insurance planning: treat the corporate policy as icing on the cake. Make a policy that you own and that you control the foundation of your coverage. Even though the corporate policy can provide short-term convenience, it could pose for you long-term trouble that is simply not worth it.

Please feel free to comment, or to contact me directly with a specific question. If you need a quote now, or a second opinion on a quote you have received, the best thing to do is to call me toll-free at (866) 633-1818. Or email me at I also encourage you to download my free Life Insurance Guide – see the above tab. Many people have found it to be extremely educational.

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