"I've analyzed your situation, and you need additional insurance."
"But I already have insurance through my employer!" This is a common response I hear, and I totally understand the sentiment. Why pay extra when you're already covered by your workplace?
However, solely relying on employer-sponsored insurance can be a risky move, and here's why:
1. Your Employer's Priority Isn't You: Employers usually opt for group benefits to attract talent and enjoy tax deductions. This means the coverage they choose for you is based on their financial constraints and perceived value of the employee group. This often results in some cost-cutting corners.
2. Beware of Policy Loopholes: I've come across some eyebrow-raising clauses in group insurance contracts. Some policies have outright exclusions, like not covering during leaves of absence, even if you're still under employment. Another bizarre one excluded claims from voluntary asphyxiation. As for disability insurance, some expect you to undergo professional rehabilitation after just two years, despite statistics indicating longer-term disabilities.
3. One-Size Rarely Fits All: Many workers, especially those in junior roles, only get life insurance worth a year of their salary. For higher earners, it might be 2x or 3x. However, when you account for debts, your family's needs, and future goals, these sums can seem paltry.
4. Going Beyond Can Cost You: Insurance is about transferring risk. If an insurer covers you without probing your medical history, they're assuming a higher risk, which gets reflected in your premiums. Plus, some benefits you think you have might only be valid if you've submitted proof of insurability – a detail many employees overlook.
In my financial reviews, I do factor in employer-sponsored benefits, but only to an extent. After all, job changes, layoffs, and career shifts are common. And if you're thinking of entrepreneurship, such benefits won't be much of a safety net.
While group benefits have their merits (and I've written about their advantages in the past), it's crucial to ensure you have adequate coverage tailored to your specific needs and lifestyle.
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