Employer-sponsored life insurance, health insurance and other benefits are nice perks. Group insurance can mean low group rates, liberal group underwriting standards, protection against policy termination and individual rate increases. However, if you rely too heavily on employer-provided coverage or assume your benefits automatically meet all your needs, you may be making a huge financial mistake. Even a quality benefit package may contain gaps that could leave you and your family exposed to serious financial risk:
- Coverage may not meet your individual needs. Employer-sponsored insurance tends to be "off-the-rack" in design. The benefits you receive may have little in common with your actual needs and situation.
- Limited protection amounts. Policies are often designed to provide basic protection or benefits. Amounts may be limited by uniform standards. Such policies, unless supplemented, could leave your insurance package woefully inadequate.
- Costs generally increase on an age-based schedule. Especially at older ages, rates on many types of coverage can increase dramatically.
- Your coverage may terminate if you leave your job. Under some policies, coverage is portable (you can take it with you when you leave), or you have the right to convert your insurance to an individual policy upon termination. But this is not universally the case. If you quit or are let go, you may find yourself out of work and without benefits.
- Coverage often terminates without benefit at retirement age. This is the very time when life insurance and health insurance can be needed most.
- Your employer has the right to terminate the coverage age any time. This can be a serious potential problem these days, with companies failing to pay premiums, closing their doors or exploring other cost-cutting options.
Perhaps the biggest risk to employees is that employer-sponsored benefits can create a false sense of security. Minimum benefits, based on employment, provide a valuable safety net for millions of workers in this country. But they are a starting point — usually not the final word — when it comes to protecting yourself and your family.
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