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Life Insurance : Rent or Own? What's the Difference?
You probably read the title to this blog post and wondered what we meant by "renting" a life insurance policy. So let's jump right in and talk about what we mean . . .
Renting
If you have life insurance through your employer then you are essentially "renting" the policy. This is because you do not own the policy, your employer does. They have full control over it, and they can cancel or change it at any time. They are not obligated to provide this benefit to you. Another thing that many people do not realize is that if you quit, retire, get laid off, or fired, you lose this coverage. (The few cases where people get to keep their policy is when they're a big exec, and it's part of their "golden parachute" retirement package. Most people aren't that lucky!)
I have especially had many conversations with people when they neared retirement at their jobs and were just finding out that their life insurance policies weren't something that they were able to keep once they retired, but would actually have to go out and buy their own policy if they wanted coverage. The problem with that? Life insurance premiums are based on 4 things: your age, your sex, your health, and whether or not you smoke. So imagine how much more expensive life insurance coverage is to buy at age 65, than it would be at age 35, or even 45. Another potential downfall of waiting to purchase your own policy when you're older and you've lost your coverage through an employer? The likelihood of developing some sort of health condition increases as we age. Depending on what it is, it could drive your premiums up or take away the option of getting insurance all together.
Group life insurance policies are more like "one-size fits all" types of policies. No one sits down with you and discusses your family's specific situation, needs, goals, and then customizes it to fit you. It usually just provides anywhere between 1-3 times your salary which in many cases doesn't go very far by the time all the bills are paid.
One good benefit of group life insurance coverage? For people who have pre-existing health conditions they may not be able to get their own free standing policy, so group coverage is their only option.
Want to learn more about the pros and cons of group life insurance coverage? Click here.
Owning
When you have your own individual life insurance policy, you own that. It's portable, which means that it stays with you no matter how many times you switch jobs, if you retire, it's yours. Individual policies blow group policies out of the water in terms of what they are able to do for you. They can be fully customized and tailored to do whatever you want it to. Want it to pay off your family's house? Make sure college tuition is paid for? Use it to help pay for long term care expenses down the line? Drive the build up of cash value in the policy to supplement your retirement income? Pull cash out of it to start a business? There are many things that you can build a life insurance policy to do, but having a policy that you own and are in control of is crucial.
Bottom Line
You always want to be in a position of strength, where you are in control of your family's financial future. If your employer offers a group life insurance policy, take it! It's free coverage, and it doesn't hurt to have more. But if you're going to put money towards a policy, put it towards one that you own and have full control of. Buying the right policy now will save you a lot of money over time when you lock in your rates at a younger age. After all, you will never be younger or healthier than you are now!
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Don't depend on an employer to protect your family's finances. Take control by getting your own individual policy in place. Call Tenaya Insurance Services today at (925) 322-8073.