Job vs term life insurance

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international001
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Job vs term life insurance

Post by international001 » Thu Jul 19, 2018 1:28 pm

Hi,

I have currently life insurance at my employer. Because benefits are based on my salary, it's ~40% cheaper of what I would get looking at term4sale. I don't grasp the full implications of it.

My questions (and other comments you may think of):

- Which the real difference between job and term LI? Just that with term LI you are locked for X years?
- I guess best option is keeping job LI now and if I get laid off just buy a term LI for X years and cancel it if I get hired again. Anything wrong
- Does it make any financial sense to lock for X years, or is it better to get it for X/2 years and then renew it for X/2 years? If you health has not changed, I guess it would be the same
- Why employer offer benefits based on salary (vs a fixed amount)? Doesn't make much financial sense from the point of view of the employer.

-J

FlyAF
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Re: Job vs term life insurance

Post by FlyAF » Thu Jul 19, 2018 1:34 pm

Does anyone depend on your salary but you?

chevca
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Re: Job vs term life insurance

Post by chevca » Thu Jul 19, 2018 1:37 pm

It's tough to say without knowing your benefit rules and policies.

For me, my employer offered a life insurance amount based off my salary and then a separate policy where you could select an amount up to $500k... along with other supplemental and AD&D insurance. The life insurance(s)were cheap when young. But, they got to be pretty expensive as one got to their upper 40's and later.

I found a term life insurance outside of work to get me to age 60 with a flat rate that was cheaper overall than going through work for that same time period. I cancelled the work ones and went with the term policy.

I see no point in doing a 2 year term policy and then renewing it every couple years. That's more work that I want to put into it, for me at least.

Rupert
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Re: Job vs term life insurance

Post by Rupert » Thu Jul 19, 2018 1:53 pm

Your work-provided insurance probably is term insurance. So you are making a false distinction between what you call "job insurance" and term insurance. The term is the length of your employment, as opposed to a set number of years. Work-provided term insurance is usually more expensive, not less expensive, than term insurance you can buy on the individual market if you are healthy, not a smoker, not obese, etc. This is because the work insurance, as a group policy, is issued with little to no medical underwriting, meaning sick people can get it.

If you actually need life insurance (if there are people who depend on your income), you should not rely exclusively on work-provided insurance. This is so because you lose the insurance when you lose or leave your job. If you have medical history or are overweight, etc., when that happens, you may not be able to buy term insurance on the individual market, or it may be prohibitively expensive for you to do so. Level term insurance for 20 to 30 years is what most people need/want.

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Re: Job vs term life insurance

Post by tfb » Thu Jul 19, 2018 2:03 pm

international001 wrote:
Thu Jul 19, 2018 1:28 pm
I have currently life insurance at my employer. Because benefits are based on my salary, it's ~40% cheaper of what I would get looking at term4sale. I don't grasp the full implications of it.

My questions (and other comments you may think of):

- Which the real difference between job and term LI? Just that with term LI you are locked for X years?
- I guess best option is keeping job LI now and if I get laid off just buy a term LI for X years and cancel it if I get hired again. Anything wrong
- Does it make any financial sense to lock for X years, or is it better to get it for X/2 years and then renew it for X/2 years? If you health has not changed, I guess it would be the same
- Why employer offer benefits based on salary (vs a fixed amount)? Doesn't make much financial sense from the point of view of the employer.
Likely you aren't comparing correctly. Many employers typically offer a base amount such as 2x salary for free. Then you have the option to buy more. If you only compare the price for the extra you buy, say another 3x salary, versus the premium for the the same amount from term4sale, chances you term4sale is less expensive. If you compare with the price for 5x salary when you would get 2x for free anyway, you come to the wrong conclusion.

The prices for life insurance through an employer is typically tiered with age. They go higher when your age gets into the next tier. If you compare the initial price with the fixed price of a 30-year level term policy it's not apples to apples.

Your health can change when you are laid off or at X/2 years. The best approach would be get whatever the employer offers for free and then buy whatever you need for as long as you need on your own outside the employer.
Harry Sit, taking a break from the forums.

Hypersion
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Re: Job vs term life insurance

Post by Hypersion » Thu Jul 19, 2018 2:13 pm

The nightmare with employer life insurance is getting a fatal injury or illness and getting let go from your job and being unable to renew the life insurance.

Same with only getting a term life insurance that has to be renewed every two years, if you get sick or hurt you won't be able to renew it.

Iridium
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Re: Job vs term life insurance

Post by Iridium » Thu Jul 19, 2018 4:56 pm

international001 wrote:
Thu Jul 19, 2018 1:28 pm
- Which the real difference between job and term LI? Just that with term LI you are locked for X years?
Just to be clear: you are not locked in with term, the insurance company is locked in. You can cancel term at any time, but the instance company cannot increase your premium or cancel you during the term.
international001 wrote:
Thu Jul 19, 2018 1:28 pm
- I guess best option is keeping job LI now and if I get laid off just buy a term LI for X years and cancel it if I get hired again. Anything wrong
This only works under two circumstances:
1) You will definitely be insurable when you lose your job.
2) You are guaranteed to be able to keep the life insurance benefit at a reasonable price
You obviously cannot guarantee #1. My employer hypothetically offers #2, although I have not investigated how premiums are calculated. You may want to investigate this at your company.
international001 wrote:
Thu Jul 19, 2018 1:28 pm
- Does it make any financial sense to lock for X years, or is it better to get it for X/2 years and then renew it for X/2 years? If you health has not changed, I guess it would be the same
If your health has not changed, I would guess the latter is a bit cheaper: a person who qualifies after a medical exam at the beginning and after X/2 years is less likely to die than someone who only qualified at the beginning of the X year period. In addition, I would guess that the number of folks who cancel X year policies is greater than the number of folks who cancel X/2 year policies.

However, it is irrelevant as you do cannot know that your health will remain the same in X/2 years. A strategy that some folks do is to buy a longer term and a shorter term policy, the idea being that when they are far from retirement, they'll have coverage under both policies, but as their income producing years gets smaller and their need for life insurance becomes smaller, their shorter policy expires.
international001 wrote:
Thu Jul 19, 2018 1:28 pm
- Why employer offer benefits based on salary (vs a fixed amount)? Doesn't make much financial sense from the point of view of the employer.

-J
There is probably not a fixed amount that makes sense for both the receptionists and president at your company. The insurance company probably doesn't want to insure someone to 10x their annual salary (too much incentive for foul play, those with chronic illness trying to get the job just for the insurance, and other sources of adverse selection), but, say, a $300,000 policy would also be so tiny as to be irrelevant to folks making mid to high 6 figures at the company.

international001
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Re: Job vs term life insurance

Post by international001 » Mon Jul 23, 2018 10:02 am

Thanks for all the replies

Yes.. I get 6x of my salary w/o any conditions at my company. I can get more if I do medical exams. But I don't really need that much. It seems other folks found better deals on the market, but I guess my company is doing it as a lost (or with some tax advantages) as a benefit to attract employees.

So as I thought it makes sense to have a term insurance in case I get laid off. Just for the insurance part of it (it may be more expensive or cheaper depending on how my health evolves).

But it's PITA having to match the cheaper work life insurance with the more "safe" market life insurance. I guess I can ask if the company offers any bridge for it. That would be ideal.

FireFool
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Re: Job vs term life insurance

Post by FireFool » Tue Jul 24, 2018 5:26 pm

I'll share another perspective in regards to life insurance through work. An employee of mine's husband was diagnosed with cancer - he ultimately died. They were both in their early 50's and had led a very financially responsible life and were on track to retire early in a few years. The treatments he went through were brutal, but throughout them he continued to work, partly driven by his desire to maintain his life insurance. My understanding of the terms of his work life insurance was that a doctor had to definitively diagnose that his disease was imminently fatal for him to maintain coverage post quitting work. My take on that was that the doctor had to get to the point where he would state there was no hope to further treatment. The family continued to hold hope with the treatments but he was so tired from them and his work day that evenings and weekends all he did was sleep - instead of spending those last months awake interacting with his family. But for the life insurance his wife would have been able to convince him to quit, she probably would have taken a sabbatical, and they would have had the opportunity to have more moments together. Although I too had life insurance through work before I retired, seeing there experience I would never go that route again.

JoeRetire
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Re: Job vs term life insurance

Post by JoeRetire » Tue Jul 24, 2018 5:37 pm

international001 wrote:
Thu Jul 19, 2018 1:28 pm
Why employer offer benefits based on salary (vs a fixed amount)? Doesn't make much financial sense from the point of view of the employer.
Currently, employers don't pay any payroll taxes on benefits like these.

Thus, it's a way to offer a bigger compensation package (salary + benefits) in a way that is cheaper for the company than offer the same total package, but all in salary.

It's based on salary because higher-salaried employees expect a bigger overall compensation package. The big guys/gals get more of everything.

il0kin
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Re: Job vs term life insurance

Post by il0kin » Tue Jul 24, 2018 8:56 pm

Absolutely get a private policy outside of your work coverage if you have anyone who depends on you for income. I have a private policy that is 5x my yearly income and an extra 6x or so via work for very inexpensive buyup. My wife works, and per discussions about this rather unpleasant topic, would continue to work after some time away were I to die, so the private policy by itself is basically an inexpensive ($24/mo) hedge that would pay off the mortgage in full and still leave a few hundred thousand dollars to help her and the kids out. If I died in an accident or something more sudden where I did not separate from my employer, she wouldn't be able to retire but would have plenty of money to help her get through life.

The other aspect to this if you have children is social security benefits; they would receive them until age 18 (I think) were you to die, and I think the spouse may get some kind of benefit as well. That would certainly help as an addition to the cash payment.

The absolute worst case scenario is that you get sick, eventually get let go from your work (terrible, but it happens more than you think), then die and your spouse is left out in the cold. Don't let a little bit of inconvenience stop you from preventing this from happening!

delamer
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Re: Job vs term life insurance

Post by delamer » Tue Jul 24, 2018 9:16 pm

FireFool wrote:
Tue Jul 24, 2018 5:26 pm
I'll share another perspective in regards to life insurance through work. An employee of mine's husband was diagnosed with cancer - he ultimately died. They were both in their early 50's and had led a very financially responsible life and were on track to retire early in a few years. The treatments he went through were brutal, but throughout them he continued to work, partly driven by his desire to maintain his life insurance. My understanding of the terms of his work life insurance was that a doctor had to definitively diagnose that his disease was imminently fatal for him to maintain coverage post quitting work. My take on that was that the doctor had to get to the point where he would state there was no hope to further treatment. The family continued to hold hope with the treatments but he was so tired from them and his work day that evenings and weekends all he did was sleep - instead of spending those last months awake interacting with his family. But for the life insurance his wife would have been able to convince him to quit, she probably would have taken a sabbatical, and they would have had the opportunity to have more moments together. Although I too had life insurance through work before I retired, seeing there experience I would never go that route again.

A sad story.

We always had enough term life insurance that we purchased independently to cover anticipated needs.

Any free life insurance that we received through our jobs was a bonus (although that is probably a poor word choice).

With potential job loss/change and potential issues with medical qualification, we bought 20- year level term after our first was born.

We cancelled our coverage once our kids were no longer dependent on us and we were FI.

international001
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Re: Job vs term life insurance

Post by international001 » Wed Jul 25, 2018 5:13 am

YEs.. it seems a catch 22. Insurance it's supposed to protect you from events and assure you some level of (financial) well-being.
Not make you change your behavior in a way that your well-being diminishes

So job life insurance only really protects under unexpected death.
Given how screwed the system, I wonder why there are no commercial products to bridge the difference. i.e. a term life insurance with a reduced premium that would not pay you any benefits if you had life insurance through work, but that would kick if you had to leave work.

international001
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Re: Job vs term life insurance

Post by international001 » Wed Jul 25, 2018 5:42 am

JoeRetire wrote:
Tue Jul 24, 2018 5:37 pm
international001 wrote:
Thu Jul 19, 2018 1:28 pm
Why employer offer benefits based on salary (vs a fixed amount)? Doesn't make much financial sense from the point of view of the employer.
Currently, employers don't pay any payroll taxes on benefits like these.

Thus, it's a way to offer a bigger compensation package (salary + benefits) in a way that is cheaper for the company than offer the same total package, but all in salary.

It's based on salary because higher-salaried employees expect a bigger overall compensation package. The big guys/gals get more of everything.
You mean employers save the 12.4% of SS and the 2.9% of Medicare ( I guess only 2.9% if you are a high earner you have your SS contributions capped)

How would that work? On my paycheck I have life insurance imputed income and this counts to Total Gross. SS are Medicare are percentages of Total Gross

JoeRetire
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Re: Job vs term life insurance

Post by JoeRetire » Wed Jul 25, 2018 8:04 am

international001 wrote:
Wed Jul 25, 2018 5:42 am
JoeRetire wrote:
Tue Jul 24, 2018 5:37 pm
international001 wrote:
Thu Jul 19, 2018 1:28 pm
Why employer offer benefits based on salary (vs a fixed amount)? Doesn't make much financial sense from the point of view of the employer.
Currently, employers don't pay any payroll taxes on benefits like these.

Thus, it's a way to offer a bigger compensation package (salary + benefits) in a way that is cheaper for the company than offer the same total package, but all in salary.

It's based on salary because higher-salaried employees expect a bigger overall compensation package. The big guys/gals get more of everything.
You mean employers save the 12.4% of SS and the 2.9% of Medicare ( I guess only 2.9% if you are a high earner you have your SS contributions capped)

How would that work? On my paycheck I have life insurance imputed income and this counts to Total Gross. SS are Medicare are percentages of Total Gross
"Total Gross" on your paycheck doesn't include company-paid benefits.

Glockenspiel
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Re: Job vs term life insurance

Post by Glockenspiel » Wed Jul 25, 2018 8:37 am

The job life insurance should just be considered an added bonus. Buy term for whatever you need. If you have an extended illness or disability and end up being let go of your job, you won't have that life insurance. I think of job life insurance as only being useful in a freak accident or sudden heart attack or something like that.

BradJ
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Re: Job vs term life insurance

Post by BradJ » Wed Jul 25, 2018 8:43 am

My strategy was to first determine the amount I needed, then if my work offered it at a deep discount to buy all I could from them, then buy the difference plus 250k from an outside insurer. I would tell anyone with dependents to at least have 250k outside of work.

robebibb
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Re: Job vs term life insurance

Post by robebibb » Wed Jul 25, 2018 9:48 am

JoeRetire wrote:
Wed Jul 25, 2018 8:04 am

"Total Gross" on your paycheck doesn't include company-paid benefits.
Employees are taxed based on an IRS prescribed value for life insurance policies with face amount over 50k which is why some companies only offer up to 50k in employer paid insurance.

MrsBDG
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Re: Job vs term life insurance

Post by MrsBDG » Wed Jul 25, 2018 5:24 pm

I believe it is better to have a private policy, mainly because you may be in great shape now and that work plan is fine, but it's possible that when the need to buy private coverage arises, you may no longer be preferred or preferred best. When I first began in the insurance business a nearby large employer had massive layoffs. It was quite sad how many 50-65 year old guys were a bit fat, had a bit of diabetes, had had a heart issue or cancer history. Some of them were more expensive to insure, others were uninsurable.

The other consideration on price, long term, is that most company plans I have seen charge premiums based on a 5 year age band so your premium is going up every 5 years.

Startled Cat
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Re: Job vs term life insurance

Post by Startled Cat » Wed Jul 25, 2018 9:53 pm

This thread prompted me to look at how much the life insurance I get "free" through my job actually costs me in taxes. It appears the tax cost is higher than the cost of a similar amount of 10-year level term insurance. Next time I elect benefits, maybe I will opt out of the employer-provided life insurance and replace it with a policy that's not tied to my employment.

international001
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Re: Job vs term life insurance

Post by international001 » Thu Jul 26, 2018 10:52 am

MrsBDG wrote:
Wed Jul 25, 2018 5:24 pm
The other consideration on price, long term, is that most company plans I have seen charge premiums based on a 5 year age band so your premium is going up every 5 years.
In my case it's xN your salary costs a fix amount Premium x (N-2)
With my salary, I beats the market. I saw the breaking point at 20 years was around $80k salary. Hope the lowest earners don't choose it at all!

international001
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Re: Job vs term life insurance

Post by international001 » Thu Jul 26, 2018 11:24 am

JoeRetire wrote:
Wed Jul 25, 2018 8:04 am
"Total Gross" on your paycheck doesn't include company-paid benefits.
I see on my paycheck ~$27 as imputed income and the same $27 of after-tax deduction. After a salary increase, that $27 increased a bit
It was supposed to cost ~$22

How does the math work? Am I paying?

delamer
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Re: Job vs term life insurance

Post by delamer » Thu Jul 26, 2018 12:14 pm

aaronl wrote:
Wed Jul 25, 2018 9:53 pm
This thread prompted me to look at how much the life insurance I get "free" through my job actually costs me in taxes. It appears the tax cost is higher than the cost of a similar amount of 10-year level term insurance. Next time I elect benefits, maybe I will opt out of the employer-provided life insurance and replace it with a policy that's not tied to my employment.
At my husband’s employer, there is no opt out option.
Last edited by delamer on Thu Jul 26, 2018 4:21 pm, edited 1 time in total.

SimonJester
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Re: Job vs term life insurance

Post by SimonJester » Thu Jul 26, 2018 3:49 pm

I have had two family members get sick enough to have to quit their job, and then die. Both had no other life insurance outside their employer. I would strongly recommend to get term insurance outside your employer if you have anyone depending on your income...
"They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety." - Benjamin Franklin

international001
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Re: Job vs term life insurance

Post by international001 » Thu Nov 08, 2018 9:18 am

I called Metlife. They seem to offer portability from employer to personal life insurance

Found this: http://louisville.edu/hr/benefits/life/ ... n-brochure

Anything against it? IT seems good to use employer LI if you can convert automatically upon employment termination

inbox788
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Re: Job vs term life insurance

Post by inbox788 » Thu Nov 08, 2018 12:42 pm

international001 wrote:
Mon Jul 23, 2018 10:02 am
Yes.. I get 6x of my salary w/o any conditions at my company
...I guess my company is doing it as a lost (or with some tax advantages) as a benefit to attract employees.
It took me a while to understand the differences between employer group life policies and term life policies.

Are you paying for 6x salary or is your employer providing it (required?)
How much insurance do you need?

Employers aren't that generous, and they may be providing perks, but they're not providing anything at a loss and neither is the insurance company. It's all a sales job, and when you really understand the product, you realize there is a germ of value, but a lot of misconception. Do you know what the germ is in Portability and Conversion? In a nutshell, when you leave the company, Portability let's you buy the same policy as if you were still working at the company, but wait till you see how much you really pay. Conversion let's you buy a whole life policy, and again, your rate will certainly increase. (search here to find out what many feel about whole life policies...hint, it's not good).
international001 wrote:
Thu Jul 26, 2018 11:24 am
I see on my paycheck ~$27 as imputed income and the same $27 of after-tax deduction. After a salary increase, that $27 increased a bit
It was supposed to cost ~$22

How does the math work? Am I paying?
Yes, it looks like you're paying $27/paycheck. Why do you think it's only supposed to be $22? It works out to about $700/year. How much for term life policy? How long term?

Note that it's an after tax deduction. Some people here have tried to turn down free company life insurance that costs them taxes because the tax cost isn't worth the value of the insurance they receive. So even "free" isn't really free. (costs your company money that the insurance company makes, so less they money they can use to raise salaries and you pay taxes on the benefit)

Anyway, for most folks, take the free insurance your company offers, but don't count on it. Buy your own term policy for the amount and time you need so it's not dependent on job. Keep it simple and separate.
Last edited by inbox788 on Thu Nov 08, 2018 12:49 pm, edited 1 time in total.

123
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Re: Job vs term life insurance

Post by 123 » Thu Nov 08, 2018 12:48 pm

Group life insurance from your employer can often be converted to an individual policy after employment ends. The premium will likely go up substantially (sometimes extraordinarily) because the only people that convert are those that likely can't get insurance elsewhere. If people are working at a job they have at least a likely minimum level of health so accordinly employer group life insurance is not overly expensive. But it is generally recognized that when the work ends the risk level often goes up dramatically, often due to advancing age or illness. The insurace companies have it all figured out.
The closest helping hand is at the end of your own arm.

Valuethinker
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Re: Job vs term life insurance

Post by Valuethinker » Thu Nov 08, 2018 1:21 pm

international001 wrote:
Thu Jul 19, 2018 1:28 pm
Hi,

I have currently life insurance at my employer. Because benefits are based on my salary, it's ~40% cheaper of what I would get looking at term4sale. I don't grasp the full implications of it.

My questions (and other comments you may think of):

- Which the real difference between job and term LI? Just that with term LI you are locked for X years?
And if the premium is guaranteed, they cannot raise it against you if you develop a condition. Whereas if you have say a bout with cancer, and change job, you won't be insurable.
- I guess best option is keeping job LI now and if I get laid off just buy a term LI for X years and cancel it if I get hired again. Anything wrong
Usually your best bet is to figure out your insurable need, and for how long, and buy it whilst you are under 35 and in good health. Guaranteed level term. A policy between you and the insurance company is more secure - an employer can change employee insurance terms at will.
- Does it make any financial sense to lock for X years, or is it better to get it for X/2 years and then renew it for X/2 years? If you health has not changed, I guess it would be the same
No. Because the chance of mortality in your risk group rises every year. Thus, even if your health has not changed, the actuarial risk of a 10 year policy at 45 is higher than a 10 year policy at 35 and will be priced accordingly (a multiple of the premium at 35 if my experience was anything to go by).

It is *very* easy to become uninsurable. A knock on the head, with no obvious medical consequences, can disqualify you. Or, more likely, push the premium to the point of being unaffordable.
- Why employer offer benefits based on salary (vs a fixed amount)? Doesn't make much financial sense from the point of view of the employer.

-J
What employers don't want is impoverished widows of ex employees. Bad for morale. Also if there is some risk of employer fault, then since damages are based on loss, I believe that the court will reduce a settlement by any life insurance paid out (that would certainly be the case under English tort law, not sure American).

Because of risk pooling and lower administration costs on group policies, the group rate can be quite advantageous. For those who face a higher than average risk of mortality, particularly so.

If an employer has a bad claims experience one year, then the insurance company will raise the premium in the next year - group insurance is annual renewable. So the insurance company bears less risk.

Conversely companies usually provide 1-2x salary, I believe, whereas for a middle class person with a non-working spouse and under 18 dependent children, the actual need is more likely to be 10x.

Valuethinker
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Re: Job vs term life insurance

Post by Valuethinker » Thu Nov 08, 2018 1:26 pm

MrsBDG wrote:
Wed Jul 25, 2018 5:24 pm
I believe it is better to have a private policy, mainly because you may be in great shape now and that work plan is fine, but it's possible that when the need to buy private coverage arises, you may no longer be preferred or preferred best. When I first began in the insurance business a nearby large employer had massive layoffs. It was quite sad how many 50-65 year old guys were a bit fat, had a bit of diabetes, had had a heart issue or cancer history. Some of them were more expensive to insure, others were uninsurable.
+1 +1 +1 +1

You can be in otherwise good health, and have some inherited condition. As you get older, the genes start to tell more on your health.

It's possible to have good genes, and screw them up. But evolution isn't very interested in you over aged 40, and so you can be carrying around a set of genes that does not convey health in old age*.
The other consideration on price, long term, is that most company plans I have seen charge premiums based on a 5 year age band so your premium is going up every 5 years.
* I think a lot of evolutionary arguments are overplayed vis a vis human beings. The best guess is that it benefits your genetics to have older aunts and uncles around, who provide additional childcare & tribal wisdom. The matriarch of an elephant herd, who in a drought will find a watering hole the herd last used 40 years ago when she was an adolescent, plays that role, as well as helping to look after the herd babies. So we are not irrelevant to the survival of our gene pool after we are 40, but its nonetheless true that the connection is less direct.

https://meredithsuewillis.com/old%20demon.pdf

The Old Demon is a Pearl S Buck story about an aged Chinese woman in a village occupied by the Japanese - I read it when I was about 11, and still remember it. See how it plays out there.

international001
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Re: Job vs term life insurance

Post by international001 » Thu Nov 08, 2018 5:12 pm

123 wrote:
Thu Nov 08, 2018 12:48 pm
Group life insurance from your employer can often be converted to an individual policy after employment ends. The premium will likely go up substantially (sometimes extraordinarily) because the only people that convert are those that likely can't get insurance elsewhere. If people are working at a job they have at least a likely minimum level of health so accordinly employer group life insurance is not overly expensive. But it is generally recognized that when the work ends the risk level often goes up dramatically, often due to advancing age or illness. The insurace companies have it all figured out.
But after employment ends, the premiums are fixed and do not depend on your health (I calculated ~ x2 with the number they gave me). Are you saying that if I'm in good health after finishing employment it will be cheaper?

Then I guess it depends on the risk you are willing to take. My group life insurance at work is cheap and I'll probably work for quite few years in the company. If worst case scenario is paying x2, I think it works for me

international001
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Re: Job vs term life insurance

Post by international001 » Thu Nov 08, 2018 5:19 pm

inbox788 wrote:
Thu Nov 08, 2018 12:42 pm
Are you paying for 6x salary or is your employer providing it (required?)
How much insurance do you need?
inbox788 wrote:
Thu Nov 08, 2018 12:42 pm
I see on my paycheck ~$27 as imputed income and the same $27 of after-tax deduction. After a salary increase, that $27 increased a bit
It was supposed to cost ~$22

How does the math work? Am I paying?
Yes, it looks like you're paying $27/paycheck. Why do you think it's only supposed to be $22? It works out to about $700/year. How much for term life policy? How long term?
After some searching, it seems company offers you xn salary coverage, but the price you pay depends on the total coverage. So if salary increases, coverage increases. I didn't realize this, but I guess it's common
inbox788 wrote:
Thu Nov 08, 2018 12:42 pm
Note that it's an after tax deduction. Some people here have tried to turn down free company life insurance that costs them taxes because the tax cost isn't worth the value of the insurance they receive. So even "free" isn't really free. (costs your company money that the insurance company makes, so less they money they can use to raise salaries and you pay taxes on the benefit)
I thought the free part didn't have imputed income, but now I'm not sure. I have been buying group life insurance for a while.

international001
Posts: 471
Joined: Thu Feb 15, 2018 7:31 pm

Re: Job vs term life insurance

Post by international001 » Thu Nov 08, 2018 5:23 pm

Valuethinker wrote:
Thu Nov 08, 2018 1:21 pm
- Does it make any financial sense to lock for X years, or is it better to get it for X/2 years and then renew it for X/2 years? If you health has not changed, I guess it would be the same
No. Because the chance of mortality in your risk group rises every year. Thus, even if your health has not changed, the actuarial risk of a 10 year policy at 45 is higher than a 10 year policy at 35 and will be priced accordingly (a multiple of the premium at 35 if my experience was anything to go by).

It is *very* easy to become uninsurable. A knock on the head, with no obvious medical consequences, can disqualify you. Or, more likely, push the premium to the point of being unaffordable.
I meant the *total* price you would pay (price(X) vs price(X1) + price(X2) ). I guess the risk is your health going bad between X1 and X2

As long as I use portability I won't become uninsured. Question is the real cost

Valuethinker
Posts: 36322
Joined: Fri May 11, 2007 11:07 am

Re: Job vs term life insurance

Post by Valuethinker » Thu Nov 08, 2018 5:59 pm

international001 wrote:
Thu Nov 08, 2018 5:23 pm
Valuethinker wrote:
Thu Nov 08, 2018 1:21 pm
- Does it make any financial sense to lock for X years, or is it better to get it for X/2 years and then renew it for X/2 years? If you health has not changed, I guess it would be the same
No. Because the chance of mortality in your risk group rises every year. Thus, even if your health has not changed, the actuarial risk of a 10 year policy at 45 is higher than a 10 year policy at 35 and will be priced accordingly (a multiple of the premium at 35 if my experience was anything to go by).

It is *very* easy to become uninsurable. A knock on the head, with no obvious medical consequences, can disqualify you. Or, more likely, push the premium to the point of being unaffordable.
I meant the *total* price you would pay (price(X) vs price(X1) + price(X2) ). I guess the risk is your health going bad between X1 and X2

As long as I use portability I won't become uninsured. Question is the real cost
X1 + x2 could be considerably more than x. Life insurance pricing is not linear w age.

These threads always amaze me given how cheap life insurance is in your 20s and 30s. Level term guaranteed premium that is.

Wait til you hit your 40s. Life insurance starts yo get painfully expensive.

Btw uninsurable is rare. Unaffordable premium quotes are not.q

SimonJester
Posts: 1655
Joined: Tue Aug 16, 2011 12:39 pm

Re: Job vs term life insurance

Post by SimonJester » Thu Nov 08, 2018 8:23 pm

From that brochure

You can generally convert your Group Life insurance benefits to an Individual Whole Life insurance policy

No thanks

Go get a term policy outside your employer, while you are young, before you get sick and need to leave your employer.

I have had two realities with all their life insurance through their employer both get so sick they had to leave their employer, then months / years later pass away without insurance.


Also be aware a terminal cancer diagnosis makes you uninsurable for any dollar amount.
"They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety." - Benjamin Franklin

Valuethinker
Posts: 36322
Joined: Fri May 11, 2007 11:07 am

Re: Job vs term life insurance

Post by Valuethinker » Fri Nov 09, 2018 6:47 am

SimonJester wrote:
Thu Nov 08, 2018 8:23 pm
From that brochure

You can generally convert your Group Life insurance benefits to an Individual Whole Life insurance policy

No thanks

Go get a term policy outside your employer, while you are young, before you get sick and need to leave your employer.

I have had two realities with all their life insurance through their employer both get so sick they had to leave their employer, then months / years later pass away without insurance.


Also be aware a terminal cancer diagnosis makes you uninsurable for any dollar amount.
It is fascinating how many posters, in the urge to save dollars per month, don't choose the logical course (the one you suggest).

There's something about the pain of that $ pcm, the feeling that it is money "wasted" vs. investing, that just makes people not want to buy the protection.

For those in their 20s and 30s, in good health, Term Life Assurance, with guaranteed level premium (there's no other kind worth having) is cheap, dirty cheap. And take it out before you take up skydiving, or mountaineering ;-).

People imagine that their own actions have a significant impact on their health. Which is asymmetrically true - you can reduce your idiosyncratic risks by not becoming overweight, not drinking too much, (especially) not smoking. Certainly avoiding red meat and dairy products is a life extender. But you can't improve your risks much above the baseline - marathoners are not less likely to get cancer, or to have bad genes, than the rest of us.

The guy I knew who was an Olympic swimmer died of a heart attack in his early 60s. The colleague who was a marathoner and triathlete has lung cancer in his early 50s (he never smoked) -- which is almost assuredly fatal within 2 years.

I wonder to what extent there is correlation between "healthy lifestyles" and factors like not speeding, wearing a seatbelt - risk factors that are genuinely under our control, which actually can make a difference (but where the risks are quite binary: a small chance of death or major industry, but most of the time no penalty for bad behaviour).

international001
Posts: 471
Joined: Thu Feb 15, 2018 7:31 pm

Re: Job vs term life insurance

Post by international001 » Fri Nov 09, 2018 9:02 am

All are good points... but still doesn't answer my question.
employer life insurance + portability
vs
term life insurance (out of employer)

Which one is cheaper and based on which factors? And are there any differences?

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