Group term insurance is a specially designed policy plan offered by firms for covering their group of employees under a single contract. Under this plan, most firms provide basic insurance coverage to employers at no extra cost.
Also, as per the plan, the employees can buy additional coverage for their kids and spouses under the same contract.
Now, the question is whether such plans are sufficient for you? Or do you need to purchase an additional plan to meet your requirements?
Are There Better Options Than Group Term Insurance Plans?
This is a trend adopted by many firms to offer such plans to their employees. These plans come endowed with benefits such as providing comprehensive insurance coverage, affordable rates of premium, easy payment choices, complete coverage for family members, and a rider option available at a minimum premium.
Also, these plans bring ample benefits for the employer as well. These include an efficient solution to tackle employee attribution, increase in productivity, coverage available at subsidised rates, and tax benefits.
Though this plan has many advantages for both the employer and the employees, as per financial experts, this insurance may not be sufficient for employees.
There are some primary reasons responsible:
Your Employer May Not Be Offering Enough Insurance Coverage
- Though these plans come at a low cost, their face value may not be sufficient for your family members. As per experts, if you have dependents, you need insurance coverage worth at least six to 12 times your salary.
- Many employees can purchase additional coverage over what is already offered by the employers. However, it becomes a problematic scenario for people with non-working spouses or dependents with special needs.
Plan is Not Customised
- Another issue with these plans is that these plans are not customised as per your individual needs. Since the policy is calculated and based on the insured group’s cumulative risk, it does not take care of individual requirements.
- Also, the insurance plan considers aspects such as the employee’s salary, designation, role, and cost to the firm.
- For example, there may be two types of employees covered by the policy. One may be an employee with a differently-abled child and a non-working spouse. Another may be an employee with a working spouse and one single child.
- Now, the group insurance policy would be applicable for both employees. However, the first employee may find it harder to work things around with the group term insurance and may have to buy more term coverage. On the other hand, this group insurance policy may be highly suitable for the second employee.
Employees May Lose Insurance Coverage on Changing Jobs
- In another situation, an employee may also lose coverage if they change jobs or are laid off. This might create gaps in the insurance plan, which may not suit you, as you may never know when you need it.
- This could create portability issues if you are not moving on to another job with the same coverage insurance plan. Though some group insurance policies allow you to change your group policy to an individual term policy, this option may be costly.
- Also, the premium may become a little difficult to pay if and when you lose your job. In some situations, even though you may not lose the job, the employer may choose to stop the insurance coverage benefits citing financial issues.
The Plan May Not Offer Enough Life Coverage For Your Spouse
- Though there may be health insurance offered for your spouse by these plans, they may not offer comprehensive life insurance for your spouses. Even if these plans provide life insurance coverage, it may be minimal to about $100,000.
- As per an average thinking trend, people believe that families would suffer financial hardships only in the case of a working member’s demise. However, this is not so.
- Unfortunately, if the nonworking spouse dies, the entire burden of raising the family falls back on the working member. This implies a loss in the working hours and eventually a fall in productivity hours. This can finally lead to financial problems for the remaining parent.
- Thus, it is advisable to purchase a separate term life insurance policy for your non-working spouse.
Plan May Not Be Value For Money
- The plan offered by the employer may not be worth the money spent. Thus, it is advisable to look for some other insurance plans that may be cheaper and meet your requirements.
- The younger you are, the more chances you may find a suitable term insurance plan per your needs. Also, compared to the term life insurance plans, the coverage offered by the group insurance plan may get costlier as you get older.
The problem is imminent with such a plan. Thus, the solution lies in purchasing an additional term insurance plan and the group term insurance plan offered by your employer. Once you know you are covered, it will also improve your productivity and motivation.
Term life insurance is designed to offer you a cover for a particular period, for example, 10, 20, or 30 years of life. These term insurance plans will be enough to cover your insurance needs.