Make Sure Your Life Insurance Is Portable, Convertible, and Affordable
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.
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 employers 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 costlier. 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.
Though it’s nice having an employer-paid life insurance policy, it’s even better if you have a life insurance policy on 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, then you have to 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 is over.
However, if you decide to purchase a permanent policy from the off-set, 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.
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 is the total amount that you already have in place; this ties in to your affordability. The insurer needs to know what your need is.
As an 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 need is. 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, then 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 today. They can help your determine what the maximum amount of coverage is that you can get. By combining your existing coverage with all the other coverage options out there, they’ll find that right plan for you that’s affordable and meets your needs.
Since insurance is oftentimes overwhelmingly confusing, we want to shed light on this industry by answering YOUR questions. So if you have any questions or concerns, comment below and your question may be the topic of our next article!
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