Resources · 6 minute read
Is your group insurance enough?
Here are three things to check in your booklet. Reviewing your coverage and making recommendations requires an authorized professional.
Almost everyone with group insurance at work believes they are covered. And they are, up to a point. The problem is that the point isn't written anywhere obvious, and people generally discover it at the worst possible moment.
Pull out your group insurance booklet. Your employer provides it as a PDF, or it's in the insurer's portal. Here are the three things to look for.
1. The salary multiple at death
Find the "basic life insurance" section. You'll probably read something like "one times annual salary" or "two times annual salary."
Do the arithmetic. If you earn $65,000 and your plan covers one times salary, the stated amount would be $65,000, subject to the policy terms. Compare it with your mortgage balance and your family's other needs.
This isn't a flaw in the plan. Group plans are designed as a floor, not as a complete solution.
2. What happens when you leave the job
This is the biggest gap, and the least known. Your group coverage belongs to your employer, not to you. The day you change jobs, get laid off, or go out on your own, it stops, often at the end of the month.
Most contracts include a "conversion privilege" allowing part of the coverage to be converted to an individual policy without evidence of insurability. But the window is short, typically 31 days, and almost nobody remembers it in the middle of a job change.
The real risk is this. If your health has deteriorated in the meantime, you can end up with no coverage and uninsurable elsewhere. That is why individual coverage may also be worth discussing, depending on your situation, even when you have a group plan.
3. The definition of disability
Go to the "long-term disability" section and look for the word "disability." You'll find a definition. It often reads something like this.
"For the first 24 months, the inability to perform the usual duties of one's own occupation. Thereafter, the inability to perform any occupation for which the person is reasonably qualified."
That second part changes everything. After two years, the insurer can stop paying benefits if you are judged fit for another job, even one that pays less, even in a completely different field.
Check the replacement percentage too (often 60 to 70% of gross salary), the monthly cap, and whether benefits are taxable. When the employer pays the premium, benefits are generally taxable, which reduces the net amount further still.
What this means in practice
The goal is to understand the limits of your group plan so you can discuss them with an authorized professional in light of your situation.
Depending on the plan and your needs, different types of coverage may be considered. Their suitability and cost require a personalized review.
This text is provided for information purposes and describes general situations commonly observed. Every group plan has its own terms. Consult your booklet and an advisor for your particular situation.