I Have Life Insurance From My Work, Is That Enough?

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Many companies offer their employees a benefits package which commonly includes a small group life insurance policy. 

The life insurance benefit (amount of insurance) is usually 1.5x – 2x your annual salary.

Is that “enough”?

The answer as always is: It depends. 

If you are single with no kids, no mortgage and no worries, I would say it’s enough. 

If you are single with a mortgage with a good salary and no kids, I would still say it’s enough. 

If you have kids, no mortgage and make a great income… I would say it’s not enough. 

Kids, spouse, mortgage… definitely not enough! 

You probably see a theme here: if you have dependents and responsibilities, your group life insurance won’t be sufficient.

Single and ready to mingle? You may not need it yet.

 

 

The Problem with Group Life Insurance

 

 

The first issue with only having your life covered through your group plan is that the moment you leave that job, that life insurance is gone. 

If you leave at the age of 50, you now have to re-qualify for an individual life policy at the age of 50 making the policy much more expensive. 

The second issue is the big one: 1.5x – 2x your income is rarely sufficient.

If you pass away, 2x your income will not be enough to cover your kids expenses and education in the future, it will not be enough to help your partner cover living expenses and mortgage/rent. There are also final expenses which begin at $25,000 that need to be covered.  

A good rule used by many advisers is to have at least 10x your income in life insurance. If you have a mortgage and other debts, be sure to add that in.

 

 

Can I Get Individual Life Insurance if I am Already Covered by my Job?

 

 

You most definitely can and should! 

Individual policies are very affordable and don’t stop when you leave your job. 

If you are in your prime earning years and if your children are young, a term policy may be a good fit to cover your most important years as a parent. 

A product I like to offer for younger couples is a combination of term and participating whole life insurance. 

The term portion is very cheap and offers a very large death benefit, but the down side is it’s temporary. This is during those 20 years where your kids are growing and a dual income is really needed.

The whole life insurance portion is more costly, will offer a smaller life benefit for the price but is permanent. Since it is participating, there is a high chance that over the years, the death benefit will grow much larger than what was originally purchased at no additional cost.

With the whole life, you can select a “20 Pay” option meaning you pay the premiums for 20 years and after that you don’t pay anymore, but coverage is for life. 

 

When Should I get the Individual Life Insurance? 

 

Group life insurance is great to have, but think of it as a bonus, don’t assume your life insurance needs are completely covered.

With individual life insurance, the sooner you get it the better for you. Your premiums will be lower and assuming you are healthy, you have a higher chance of being approved. 

 

Filip Ambroziak

Filip Ambroziak

Need a quote for your home, auto or business? Call Filip Ambroziak at (416) 803 2113 or email him at filipa@pbnet.ca.

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