Sears recently announced some unsettling news for its retirees: the retail company is slashing its life insurance benefits for a number of its more than 90,000 retired employees.
The notice allegedly gives retirees the option to convert all or a portion of their group coverage into an individual whole life policy and cover the costs of premiums. Alternatively, affected retirees could have to purchase their own individual policies, in which case many would be denied due to their age and pre-existing conditions.
This is particularly unfortunate because purchasing life insurance for the first time as a senior can be prohibitively expensive, and depending on existing health conditions, it could be nearly impossible. In the wake of the Sears news, consumers are left with one important takeaway: Employer-provided life insurance shouldn’t be solely relied upon for long-term coverage.
My company helps people get individual life insurance online. Here are some of my arguments about why I believe relying solely on group life insurance is a mistake.
Group life insurance is cheap and convenient for a reason.
Most employers provide group life insurance at little or no cost to the employee. But there’s a catch: group life insurance policies offered by employers typically provide the bare bones in terms of coverage, often the equivalent of a year’s salary. For instance, if an employee earns $45,000 per year, the typical group plan coverage would only amount to $45,000. It’s a good starting point, but if a spouse or a family also relies on that income, an employer-provided life insurance policy is hardly enough coverage to protect their standard of living and fulfill their long term needs. Case in point, 69% of employees say the group life insurance they have isn’t enough to adequately protect their family.
Here’s an article my company uses to educate consumers about this problem.
Coverage equal to a year’s worth of income can be sufficient for certain categories: young professionals with no dependents, for example, are often well served by employer-provided life insurance: it is cheap, convenient, and provides adequate protection. But most people should consider expanding their protection beyond the modest levels of group life policies. The DIME method is a simple method of assessing one’s coverage needs by factoring Debt, Income, Mortgage, and Education into the calculation.