Shopping for something as expensive and as important as life insurance can be stressful, especially since it is an intangible commodity. Not only is it stressful, but it can also be confusing, which can lead to mistakes – mistakes that can have costly consequences. In most circumstances, the biggest mistake that people make is not truly understanding their policy. While there are many important factors that policyholders should be aware of, the most important are portability, convertibility, and affordability.
Portability
In the insurance world, when you talk about portability, that means that you’re able to take your insurance policy with you. To explain, if you have life insurance coverage through your employer as a group benefit, then your death benefit could be taxable to your beneficiaries should you pass away because your employer paid for the policy. Moreover, if you retire or quit your job through which you have your policy, then you’ll not be able to take your group life insurance policy with you; it isn’t portable.
If you depend on your group life insurance, which isn’t portable, then you may find yourself without coverage should you leave your employer. Not only will you have a lapse in coverage, but getting life insurance later may be more difficult and costly. As you age and encounter more health problems, your rates may go up. That’s why it’s always better to purchase life insurance when you’re young and healthy. Therefore, don’t wait to find out your employer coverage is not portable when you’re retiring. By that time, life insurance will be more expensive.
Convertibility
Though it’s nice having an employer-paid life insurance policy, it’s even better if you have a life insurance policy of your own. That way, if you move, quit, or retire from your job, you still have coverage. Now it’s simply a matter of choosing which type of life insurance coverage you want to get. If you choose to get term life insurance, you must consider convertibility. Whereas with employer-paid coverage, you have to consider portability, you need to ensure that your term life insurance has the potential to convert to a permanent policy once the specified term ends.
However, if you decide to purchase a permanent policy from the outset, then you do not need to worry about convertibility; a permanent policy remains in force for life – that is, if you don’t miss your monthly payments.
Affordability
In addition to choosing the type of policy you want, you also need to determine how much coverage you need and how much you can afford. Furthermore, you need to find out how much coverage you can have, especially if you have coverage through your employer. For instance, you may want to purchase insurance from a big-name national carrier. They’ll likely want to know what the total amount that you already have in place; this ties in to your affordability. The insurer needs to know what your need is.
For example, a family with a household income of $100,000 and a mortgage wants a $10 million policy. Depending on which carrier they choose, the family may not be able to get that policy approved. The carrier wants to know what coverage the family already has and what their needs are. They’ll ask, “Does the family have a $10 million need?” Carriers may even have a general coverage cap; however, there are always exceptions.
Bottom line: make sure your life insurance is portable. If your employer coverage is not portable, you need to purchase an additional plan that is both convertible and affordable. Rather than figuring all this out on your own, you should reach out to an insurance agent. They can help you determine the maximum amount of coverage you can get. By combining your existing coverage with other coverage options available, they’ll find the right plan for you that’s affordable and meets your needs.
Understanding Additional Key Life Insurance Features
Beyond portability, convertibility, and affordability, there are several other important factors that can influence how well your life insurance policy works for you over time. Two of the most overlooked yet critical aspects are renewability and cash value accumulation.
Renewability
If you have a term life policy, it’s important to understand whether it’s renewable. A renewable policy allows you to extend your coverage at the end of the term without undergoing another medical exam. This feature can be extremely valuable if your health changes during the term, as it ensures continued protection even if you become uninsurable later. However, keep in mind that while renewal guarantees coverage, it often comes with higher premiums since rates are typically based on your age at the time of renewal. Reviewing your renewal options early can help you plan ahead and avoid a lapse in coverage.
Cash Value Accumulation
For those with a permanent life insurance policy, another key feature to understand is how the cash value works. A portion of your premium payments goes toward building cash value, which grows tax-deferred over time. You can borrow against this value, use it to pay premiums, or even withdraw from it in certain situations. However, any unpaid loans or withdrawals will reduce your death benefit, so it’s important to manage this feature wisely.
Ultimately, the best way to make confident, informed decisions is to review your policy in detail with a licensed agent. They can help you understand all of your options, ensure your coverage aligns with your long-term financial goals, and prevent costly surprises down the road.
Life Insurance Questions?
We hope that this life insurance advice is useful to you.
If you’d like to learn how we can help you plan your retirement, call Empower Brokerage at (888) 539-1633 to speak to one of our Life and Annuity experts or leave a comment down below.
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This article was updated on October 16, 2025.