Common Problems with Employer-Provided Life Insurance Policies - Baltimore Post-ExaminerBaltimore Post-Examiner

Common Problems with Employer-Provided Life Insurance Policies

Almost 60% of Americans acquire their life insurance needs through an employer-provided life insurance plan. This kind of life insurance is the easiest kind to get. All you have to do is get a job with an employer that offers it. The employer bears the major brunt of the costs associated with the premium. In fact, the employer pays the larger ratio of the premium for all employees. Usually, the employer pays 75% to 85% of the premium while the employee pays the rest.

The employee pays the premium automatically through paycheck deductions. Depending on the plan, the employer may also pay the greater ratio for deductibles, copays, and coinsurance as well. The employee enjoys their coverage for as long as they are employed. Many people wouldn’t have any life insurance at all if it wasn’t for employer-provided insurance. However, such insurance plan structures don’t always come without any problems.

They Are Changed on an Annual Basis

Over 73% of all full-time employees get their life insurance through work. That is a lot of people. Accordingly, your employer must pay a lot of money for group life insurance work coverage. If your company employs anywhere from 10 to 100 people, then you do the math. Over 150 million workers are covered by employer-provided life insurance plans.

Employers routinely switch their life insurance carriers on an annual basis. This is done out of economics. Paying the lowest premium, finding policies that offer the least benefits, and so on. Employers usually have to fill out paperwork every year to change carriers. Benefits may increase or decrease unpredictably, and severely, on an annual basis.

They Don’t Offer Adequate Coverage If You Need It

Employer-provided life insurance is better than having no insurance at all. But for many people, it just isn’t enough to cover their needs. Well over half of the American workers earn less than $30,000 a year. The average automatically deducted premium for employer-provided health insurance can be as much as $6,400 for one person. To cover multiple dependents, over $18,000 would have to be deducted.

The average hospital emergency room visit can be anywhere from $1,000 to $5,500.  Or, easily more. Significant hospital stays for major medical issues become progressively expensive. This catch-22-like situation would almost be farcical if it wasn’t serious. American workers are having significant value deducted from their paychecks to pay for employer-provided health insurance coverage, which probably won’t cover their needs when necessary.

You Can’t Take It with You

The sad truth is that many people stay employed in jobs they don’t like because they can’t afford to give up the coverage they have. Unlike some life insurance policies you can’t cash it out. Even if the terms are changed annually, it’s better to have it than not. Or to enter an uncertain job market and start all over. You can’t transfer your employer-provided coverage if you switch jobs. If you leave or are fired, your benefits end. Paying for temporary COBRA insurance benefits is usually a non-starter. Especially for people who can only afford life insurance through their job in the first place.

Alternative Options

If you want to double down for a less expensive option you may want to look into final expense insurance.  This is a much cheaper life insurance option that covers the basics of a funeral and in some cases other related expenses.  Policies generally range from $12-$40 per month depending on the amount of coverage and your age.  You can search final expense insurance quotes online to get a better idea.

Better Than Nothing

Employees must deal with annual paperwork and bureaucracy. Offered coverage may not actually be adequate for emergencies. Employer-provided life insurance benefits can’t be transferred. The system is not perfect by any means. It is, however, a lot better than not having any life insurance at all.


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