Why Do I Need Another Policy? If I Already Have Life Insurance Through My Employer

Today to attract and retain good talent, companies are being creative by offering perks. One of the perks often given by companies to their employees is a life insurance policy to show consideration towards employee’s families as well.

So, if your employer is giving life insurance policy then why do you need another one? Why should you take the hassle of getting another one? Below reasons will help you understand why it is necessary.

One size does not fit all

The basic purpose of getting a life insurance is that it should meet your needs. The main purpose of a life insurance policy is that it should take care of your loved ones in your absence. Employers provide group life insurance, the coverage for it is decided based on your salary slabs or designation you hold. The life insurance offered by your employer may give you a coverage of INR 10 lakhs. This may sound a lot of money but everyone’s dependents in the family, income source, responsibilities, and future goals are different. It is not possible to evaluate every employee needs and give them cover according to that. The group life insurance does not work on individual criteria’s but on the whole group. The coverage given by your employer will not be enough for your family’s needs and the money may not last for a much longer period, it will result in deep financial crises for your family.

Life insurance coverage from employer may have age limit on it

Life insurance by Employer may come with a specific term limit say 10, 15 or 20 years. Once you reach that term the coverage may expire. In another case, if you retire from the job you may no longer be active member or employee of the company. This may again result in loss of life insurance and will leave you uncovered. In any case, later part of your life you may not have coverage when you need the most. For example, a term life cover for a 58-year-old non-smoking male for a term of 17 years that will cover him up to 75 years of age cost around INR 2000 to 3000 monthly for INR 50 lakhs cover. This is almost 4 to 6 times more than what you would pay if you had bought an individual insurance policy at a young age in your 20’s or 30’s. Getting a life insurance in your senior years will cost you a lot and also come with lot of terms and conditions which may not be in your favour and ultimately create hassle during claim settlement.

Employer can end the coverage anytime

Group Life insurance plans get renewed every year. If the board of directors or the company’s management feel the company is not making enough profit or does not have sufficient money to fund the perks of the employees they might remove or terminate certain benefits. There can be every chance a group life insurance is not renewed by the employer at the end of the year which will terminate your life insurance policy and will leave you financially exposed to the risks of uncertainties thrown by life.

Life insurance by employer cannot be converted into individual policy

The other draw back of the life insurance by the employer is you cannot increase the coverage or convert it into your own individual insurance policy in case you leave the company or the employer ends the coverage. The terms and conditions are decided by the employer and the insurance company. The employees cannot have their say in this type of coverage or any additional riders that need to be attached. It is basically you get whatever customisation is chosen by the employer or the chosen insurance company has agreed to offer for a specific premium.

To conclude, life insurance from the employer are not tailored to your needs which may leave you exposed when you need it the most. There are always benefits to having employer’s group life insurance policy as it gives you coverage, easy qualification, complementary/no cost and convenience but just relying on it alone can be a big mistake.

Recommended Read: Benefits of Term Insurance at Young Age