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The Amber Stitt Show

Focus on Risk: Group Life Insurance & Making Informed Decisions for Your Family's Financial Future

August 29, 2023 • Amber Stitt • Season 2 • Episode 42

0:00 | 4:30

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Welcome back to another episode of The Amber Stitt Show!

In today's quick classroom session, we're diving into the world of group life insurance. Many of us rely on employer-provided life insurance, but have you ever considered the limitations and potential risks that come with it?

Join me, Amber Stitt, as I share some valuable tips on how to navigate group-term life insurance and why it might not be enough to protect your family's financial future.

From portability concerns to coverage limitations, we'll explore the disadvantages of relying solely on employer insurance and discuss the importance of having an individual private plan that fits your needs.

So grab your notepad and pen, and get ready to take some notes on this important topic. Stay tuned for another informative episode on The Amber Stitt Show!

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Hi there! Welcome back to the Amber Stitt show. I am your host, Amber Stitt, and I have another quick classroom for you all today about group life insurance. And it can just really be thinking about group employment benefits as a whole. We do a lot of policy reviews for our teams, and group term life specifically comes up a lot. And so I wanted to speak briefly today and just share some tips. A lot of people are relying on employer life insurance, and I think it's very important to think about this a little differently. And so a typical amount might be 50,000 that's available through the benefit package for free, and then you can increase the benefit, sometimes a certain X factor of your salary I've seen two times, I've seen different numbers.

But regardless, there is this amount of coverage that people rely on through their jobs, and you may have to apply and do underwriting. Some are just automatic. The big issue we see here is when we're factoring in, we do some calculations, but then we also speak with you directly on what do you want given family size, goals, and other things in the future. So as we're coming up with this number, we're looking at, okay, we apply for a certain amount of life insurance. What else do you have existing? And this is something we disclose on applications. A lot of people are building their total amount of coverage based on splitting the difference between group insurance and their private plan. But we strongly urge you to consider the fact that group insurance through your job, that life insurance is usually not portable. And I've spoken with one of my friends.

She has been a senior director in HR for, gosh, over 20 years. And we were talking about this at dinner last week, which made me think I should talk about this with the audience. She said, even if it's convertible, here's what happens. There's usually a timeline. And if people switch jobs because they're just changing a job, there could be this time frame of 30 days, not 31, not 45. There's a letter that's generated, you have to check your mail, and then the conversion is within a period of time, and you must meet that time frame. And people miss it a lot. And so if we're relying on group life insurance for our family, and we change jobs, and there's a lot of job changers out there more than ever.

And if there's a disability or something worse where you're not eligible, and you have to leave that job, and you'd miss the mailbox and you didn't get that conversion. Oftentimes we just don't have that convertibility. And then we're exposed, and our family can't get more because maybe our lifestyle has changed, our health has changed. And so we really want to caution you to don't consider that being the end all, be all. As you're building out the total coverage for your family, usually employer coverage isn't enough. And we want to be sure that you have the ability to have an individual private rate-locked plan that follows you throughout your lifetime. We really want to make sure we're taking advantage of the lowest rates and locking in that plus your health, because age does matter, and the older we get, the age can be a factor. But I'm more concerned, I think, based upon the health changes that can be out of there.

So really, to wrap this up, the disadvantages of group term life insurance could be that it might only cover three to five times your annual income. And that might not be enough, especially if there's a family that's growing or mom and dad might need your income. If you're taking care of other people, think about who are your dependents now, and dependents potentially in the future, You'd have to reapply for more coverage if you needed more for any other people or like, adult parents. So we want to think about that. And then the group insurance usually covers you while you're a part of that organization, providing the coverage. So if you leave the company, retire have a disability, you might not have that portability. So portability is key. And sometimes if there is coverage over a $50,000 limit, depending on how they're providing it to you, there could be a taxable element.

So that would be something for a tax advisor to answer. We really want to look at what you have and not necessarily opt out or change that. We just don't want to build our total life insurance strategies by relying on splitting the difference, because that life plan might not be there if you change jobs. So I hope this was helpful. We'd love to help review anything you have. Please contact us if you have questions, but that is your quick classroom for the day, and I hope that helps. Thanks for listening. Have a great day.

Thank you for joining us on today's episode of The Amber Stitt Show. For more information about the podcast, books, articles and more, please visit www.amberstitt.com. Until next week, enjoy your journey at home and at work. Thank you for listening!