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Assessing Your Life Insurance Coverage

Life InsuranceOne of the perks of being employed in the formal sector is that you get to have life insurance coverage. However, no matter how enticing the compensation package of your employer seems to be, there are always a couple of things that you might complain about if you take a look close enough to read the fine print. Is the life insurance coverage that you get from your employer something that applies to your family? Are you paying too much for your share of the coverage?

What is the status quo?

While the situation varies from one employer to another, most companies allow their employees to purchase life insurance coverage for their family at a special reduced cost and without any need for medical examinations. Moreover, if you make at least $75,000 annually, then the added coverage may come at very little cost to you or no out-of-pocket cost at all. Because the deductions come straight out of your pay check, paying for your family’s life insurance policy does not have to hit you hard. Of course, all that talk is ideal. But what if your situation is less than ideal?

Situation No. 1: Not Enough Coverage

What if your employer does not offer a comprehensive life insurance policy or you are required to pay a steep out-of-pocket cost for your coverage? According to experts, your policy should be worth 10 to 12 times your annual salary in order for you to say that the coverage is comprehensive enough. Knowing that your family will receive that much after your untimely demise will assure you that your surviving kin won’t be burdened with your premature death.

Situation No. 2: Losing Coverage

When you change jobs, you’re also going to lose your life insurance coverage along the way. Although this isn’t such a problem when you are switching jobs because you know what compensation package you are agreeing to before you to terminate your employment with your previous employer, the problem is if you are laid off or if the life insurance package you enjoy currently is not portable and your new employer does not offer a similar life insurance package. For both situations, you can ask if it’s possible for your group life insurance policy can be converted into an individual policy. Of course, there is the case of the affordability of the premiums if you convert your group policy into an individual one.

Situation No. 3: Developing A Serious Health Condition

If you become sick and the only insurance policy you have to your name is the group insurance being extended by your employer, then you may be tied to your job through necessity or risk losing coverage. Ironically, this situation would leave you without any coverage if you were forced to leave your job because of your illness. With this in mind, it may be a good idea to set up an emergency fund dedicated to this type of contingency. Better yet, you can get yourself a policy of your own choosing to supplement your existing policy and even replace the latter when things get bad. Even a professionals with high paying jobs at Nick Scali advise that most insurance companies bar sick candidates from getting coverage so it’s pertinent that you enrol in a policy while you’re still as healthy as a horse.

Author Bio

Kent Farell, a registered financial planner, shares the best insights on financial management and investment. He also loves to give wise tips about spending, saving and overcoming debts.

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