What is the difference between term life insurance and life insurance offered by an employer?
I was able to get a good rate on a term life insurance policy with a 20 year term. My workplace life insurace seems similar, but the rates change over time. Are there any other difference or things to think about with comparing these policies?
As far as the coverage goes they are basically the same. When you (or your employer) stop paying or you leave your job, they are both done.
Your employer is buying the group policy sort of at the average rate for all employees, young or old, healthy or not so healthy. So, if you are healthy, don't smoke, have parents that lived to a ripe old age, you should be able to easily find term life insurance cheaper than the group rate. If you smoke and particularly if you have had a signifciant medical problem such as a heart attack or cancer, you may not even be able to get insurance except through your employer's group plan (or at least it could be very expensive). 14 years ago, I was diagnosed with cancer so the only place I could get insurance was through my employer. Now, after 14 years of being cancer free and a non-smoker, I qualify for a prefered rate with most insurance companies. (The way I see it, I cheated the insurance company out of at least 10 years of premiums).
Probably the biggest difference is in who owns the policy. The group policy is owned by your employer. Quit or lose your job, you lose your life insurance. Have your own term policy, the policy goes with you.
Another issue is a tax issue. If you buy a term policy, you will use your own post tax dollars. The group policy is usually an employee benefit and provided free to you up to some multiple of your annual salary. An employer can provide up to $50,000 of term life insurance tax free to an employee, any coverage over $50,000 the premium is taxable to the employee.
Bottom line, not knowing your circumstances, if you are healthy, buy your own term policy and take the employer policy up to the $50,000 limit. If you have a health issue and term insurance is expensive or unavailable, take as much of the employer's insurance as you can get. Try not to change jobs unless your new employer also has group life insurance.
As mentioned above the coverage and sum assured remains the same overall. When the insurance is offered by employer, the employer is responsible for paying the entire premium amount as long the employee is serving the organization. The life insurance policy is cancelled if the employee leave’s the organization.
I know you posted this a long time ago, but I'm just answering anyways incase there are others out there in a similar situation.lol
but first off...That's great that your employer offers you some life insurance, and that you were also able to get a great rate elsewhere. What I would do...is take both! Most employers pay for all the life insurance they offer (or a huge chunk of it) so you might as well take advantage of that discount. But if you don't plan on working till your old age, and especially if you don't plan on retiring at your current company, you should look into your own personal life insurance outside of work...you and your work place may go your separate ways for whatever reason. and if or when that happens, you'll no longer have the life insurance they offered you.
So I would do both. And if you do decide to shop around, personally, QuickBrokers.net works great if you're in Canada. or Kanetics.com if you're in the states. those would be my recommendations.
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