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Employer Sponsored Life Insurance


Now I'm not the brightest bulb on the Christmas tree. Many times I'm just getting the joke after everyone else has stopped laughing. Here's something that took me ten years to figure out. My slow awakening may save you piles of money.

In 1974, I went to work for a major insurance company. They offered the usual package of benefits - health, dental and life insurance. They gave me one times my salary for free and I could buy up to four times additional life insurance for an extra cost. Like many of you, I just needed to sign my name and I was insured. I thought it was odd that there were no health questions asked, but never question a good deal. Or so I thought.

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At that time, long rate guarantee commercial term policies weren't widely available as the companies were still pushing archaic whole life policies on the public. About 10 years later I started selling more term policies as they became more available and competitive and realized I was paying much too much for my employer sponsored life coverage. After investigating this I discovered an insurance term called "pooling." I mentioned above that I was not asked any health questions to get my group coverage. What my company was doing (and yours is today) was "pooling" me with the rest of the people I worked with. This means "average" rating me with everyone else and offering blended rate to everyone in his or her corresponding age bracket.

I realized by doing this, the company was assuming average health for everyone - some sick - some fair - some good - some in excellent health. In other words with being in good or excellent health, I got to pay extra to offset the sick one in the group. It didn't take long to figure out that I could drop out of the group and buy an individual policy with a long-term rate guarantee for less money that I was spending.

Here's a second realization I had. Group rates (probably like yours) were banded in 5-year increments. In other words, every 5 years (ages 30-34, 35-39, 40-44, 45-49, 50-54, 55-59) my rate band changed and the plan got even more expensive. Since I was young, I didn't notice that fact until I hit 35.

What You're Paying Now.

If you have group life insurance through your place of employment, at no cost to you, be thankful. If, however, you currently have a voluntary plan, check the details of what you are getting -- and what you're paying for it. You may be less than pleasantly surprised. This may be an ideal time for you to shop the lower rates and get the most for your money.

We've had many clients realize this and were able to drop out of the group life plan, purchase an individual policy with a 20-year rate guarantee and actually save money. Now the key to this is you must be in good to excellent health to make this work. If you're sick, you have a better value in the "pool" as others are paying extra for your coverage. My suggestion to you would be to contact the human relations person where you work and ask the following questions.

In this example, I'll assume you are 43 years old. Ask them, "do my rates change as I get older" - they will probably say the next change is age 45 then 50, then 55 and so on. Then ask, "Based on today's rates, what would my rate be if I were 45, 50, 55 and 60 today?"

Take those numbers and compare them against longer-term fully guaranteed contract available on this site. You may be surprised that you possibly can get a guaranteed-rate policy for close to what you currently pay for your non-guaranteed (and increasing) group rate.

Who Controls Your Insurance?

It's also important to keep in mind that group insurance isn't portable. If your employment ends, your group life insurance would too. An individually owned policy isn't dependent on your next employer and is portable. In today's transient business climate, who controls your insurance coverage is an important consideration.

Questions? Comments? Suggestions? 1-800-542-5530

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