Few people revel in plotting and planning the details surrounding their death. The subject understandably irks most—myself most whole-heartedly included. But, people additionally don’t want to burden family members with burying costs and other financial odds and ends that result from one’s death. Group term life insurance attempts to bridge this chasm—providing financial security and peace of mind.
Group term life insurance is ordinarily an offered benefit of the workplace, although not all employers readily provide affordable plans—despite the fact that the IRS grants a tax exemption for the first $50,000 invested in this type of life insurance. Conditions, including a service wait (specified amount of time employed or specified amount of hours worked) and employee co-payment routinely apply. But, most jobsites extend some sort of life insurance benefits to applicable employees—the trouble is, few workers thoroughly examine their coverage; sometimes employees overpay, sometimes they don’t have adequate coverage.
The basic premise of life insurance is this: Consumers pay an annual premium which is contingent upon several factors (health, most notably). If a policy holder dies while the policy is intact, a stipulated amount of money is paid to the named beneficiary. There are two distinct types of life insurance: Permanent Life Insurance and Group Term Life Insurance. Permanent life insurance amounts to a life-long policy which cannot be revoked; in addition, accounts build a savings component—which can be borrowed against in times of economic duress. Currently, Permanent Life Insurance policies allow holders to unlock funds early if diagnosed with a terminal disease (doctor must explicitly state that patient has less than 1 year to live). Known as Accelerated Death Benefits, this option assuages the financial burden of medical costs during a person’s final years.
Group Term Life Insurance is less comprehensive, but more affordable—a key reason why it is consistently offered by employers. The term portion refers to the ongoing evaluation process; that is to say, policy holders must reapply for benefits after the end of a term. Terms can be 1 year, 5 years, 20 years; the overriding factor is that they are not lifelong—meaning that rates will change. As holders increase in age, health tends to decrease, and premiums on group term type of life insurance soar. This is the chief detraction of this brand of life insurance—instability of premiums and consequently coverage. Employers, of course, applaud this kind of life insurance, since rates are relatively low during one’s working years, spiking after retirement.
Policy holders ordinarily earn better premiums by practicing healthy living—most life insurance providers offer non-smokers substantial deductions. But in the end, group term life insurance is a necessary security blanket. And while employers routinely select thrift over comprehensive coverage, it is certainly better than the alternative—complete financial uncertainty. However, workers should definitely examine whether they can amend their life insurance portfolios (especially if co-payments are required) as well as considering a possible switch to permanent coverage. Life expectation continues to skyrocket in this country, so it stands to reason that life insurance coverage should follow close behind. In short, people are spending more time at life’s banquet, so their bill will be larger. Now, if you’ll excuse me, I really must be going … medical emergency.
By Jean-Pierre Lacrampe