Putting your needs first: Why group insurance doesn’t cut it
Employment contract? Check. Benefits? Check. Group insurance? Check. Do you clearly understand what you are covered for and are all your insurance needs taken care of? Not so fast.
If you have group coverage through your job, it can be tempting to assume that you’re good to go on the insurance front. The reality is that the group insurance benefits offered by employers often fall well short of the level of coverage we require and lack the nuance to meet our personal needs.
In this article, we explore the pitfalls of relying exclusively on group insurance and highlight how often one size doesn’t fit all.
I’m covered, right?
When it comes to your insurance, the devil is in the details. Yes, you have group insurance through your employer, but what does it cover? Perhaps your benefits include a new pair of glasses every couple years, or maybe a few hundred dollars annually for massages and physiotherapy. These perks are nice, but they won’t do you much good if you have a serious illness or accident.
If one day you can’t work due to the loss of a limb, how will you replace your lost income? If you are diagnosed with a chronic illness and need to pay for expensive medication, where will the money come from? And if – knock on wood – you pass away suddenly and unexpectedly, will your surviving family members have the resources to pay off your mortgage?
If your group coverage includes disability, critical illness and life insurance, then you’re off to a good start. But again, it’s the details that matter most and determine the answers to the crucial questions above.
- Life insurance. When included in a group policy, life insurance often features a death benefit of two times your annual salary. This may sound like a lot, but how long will this amount last if you leave behind a spouse who has to keep paying a mortgage, raise your kids and put them through university? Furthermore, most executives find that their bonus structure constitutes a large part of their compensation, but this bonus may not be part of the calculation of death benefit.
- Disability insurance. Group disability typically covers 40%–60% of your salary. If you were to become disabled and unable to work, would you be able to manage with only 40%–60% of your current income? How would this impact your family’s lifestyle? Do you understand the definition of disability under your group coverage?
- Critical illness insurance. Group critical illness insurance is often narrowly defined. This is a problem because more exclusions mean there’s a greater risk that you could receive no insurance money should you become seriously ill. This could force you to go back to work when you should be focusing on recovery.
Ours, not yours
Even if the group coverage through your employer is (currently) generous and ticks all the right boxes in terms of insurance essentials, it still has one major shortcoming: your employer owns the policy, not you.
If you rely solely on your group coverage for disability, critical illness and life insurance, then all your eggs are in one basket. If you lose your job tomorrow – whether you are laid off or resign or the company goes bankrupt – your insurance coverage will disappear along with it.
Sure, you may land another job straight away that also provides generous group insurance, but there is no guarantee. In addition, a pre-existing condition clause may apply. If a lack of individual coverage puts the financial well-being of your family in jeopardy, this becomes a risky situation. Even if you don’t lose your group insurance, your employer can change the coverage and benefits at its discretion as the owner of the policy, potentially leaving you with less security and more uncertainty.
Meeting your needs on your terms
We’re not saying that group insurance is bad to have, but chances are it is not providing you and your family with the financial safety net that you need. From insufficient coverage to the risk of losing it entirely if you lose your job, your group insurance is likely not cutting it.
With individual insurance, you can tailor your coverage to meet your family’s unique needs. If you are the family’s sole breadwinner, an individual disability insurance policy can allow you to lock in benefits covering 100% of your salary, rather than the 40%–60% offered under the group plan.
Another key advantage of individual policies is that they guarantee future insurability. For example, once you have an individual life insurance policy, this coverage is guaranteed for the rest of the life of the policy (usually age 80 or 85 or permanently, depending on the type of policy). This is in stark contrast to your group life coverage, which will disappear as soon as you change or lose your job.
Confidence through clarity
Insurance is one of those things that most of us wish someone else would just take care of for us. That’s why it’s so common for people to think, “Group coverage through work? Great, that’s insurance taken care of.” However, as we’ve illustrated here, adopting this approach can put the financial well-being of you and your family at risk. You owe it to your loved ones to do the right thing.
At Rubach Wealth, we can help you achieve clarity on what you have and what you need so that you can be confident that your family’s financial future is secure. You need to make an informed decision. If you’d like to sit down with us to talk through your situation, give us a call today.
It’s not about ditching your group coverage; it’s about helping you make sense of your current situation and identifying gaps that can be filled with tailored individual coverage. Working well in a group is important in the office, but sometimes your needs must come first.
Disclaimer: This article is provided for informational purposes only and does not constitute any form of legal or tax advice. You should consult your lawyer and/or accountant prior to making decisions related to the topics covered in this article. Rubach Wealth can work with you to facilitate such discussions.
