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Life Insurance Myths.

By: Bernard Fliss.   
Date Added : July 4, 2011 Views : 426

I get a great rate on my life insurance through work.

Although buying supplemental group term insurance is easy it usually is not the least expensive way to purchase additional life insurance coverage. Two things are working against you when you buy additional life insurance coverage through your employer.

First, you do not own or control the policy. Future rates, coverage amounts, and portability of coverage are decided by your employer and the insurance carrier that they use. If you separate from service you usually cannot move your term insurance, you may be given an option to convert your group term to a permanent policy at a pre-determined rate class (such as a standard smoker rate even if you are a nonsmoker). This will dramatically increase your cost of insurance sometimes by as much as 10-20 times your term insurance rate. And even if you stay with your employer your rate will ratchet up every 5 years, if you are a healthy 30 old and stay with your employer until age 60 your total cumulative premiums will be higher with group term than a 30 year term policy that you purchased and controlled on your own.

Second, when you purchase additional coverage through a group plan the insurance company experiences “adverse selection” which simply means that they have to except all insureds that fit the criteria of the group plan. This results in a disproportionally high enrollment of persons with adverse health conditions who cannot obtain life insurance on their own. The insurance company realizes this and prices group rates much higher than a personally owned policy, this increase in group rates usually starts after age 40. There are two reasons that this is bad for the person who relies on supplemental group term, first if they are healthy they will pay a much higher rate than normal to subsidize the underwriting of all the unhealthy risks that the insurance company has to take on as part of the group plan. Second if they are healthy and buy supplemental group term in their 20’s or 30’s, and later on their health declines they will be stuck paying ever increasing rates on their life insurance because they can no longer qualify for a personally owned policy.

The moral of the story is that if you are in good health or even if you have some medical conditions you should always try to obtain a personal policy for your supplemental insurance needs, you will almost always pay less than the group rates for the same coverage if you add up all the costs of your group insurance until you retire.

Bernard Fliss

Principal www.shopmyterm.com insurance services, a leading provider of free term life insurance quotes.

Bernard Fliss is the author of this article on Term Life Insurance. Find more information on Term Life Quotes here.

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