Evaluating Life Insurance Offered at Work

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by Diana Ransom
Tuesday, May 1, 2007

Beefing up your life insurance by buying coverage at work can be easy: You typically pay through payroll deduction and you may not have to take a medical exam or answer questions about your health.

But depending on your age, health and family needs -- as well as on the design of your employer's plan -- such coverage may be a good deal or a bad one.

So before you sign up, \"check outside the group plan to make sure you really do have the best price\" and a policy that fits your situation, says David Woods, president of the insurance industry's Life and Health Insurance Foundation for Education in Washington.

Most employers provide life insurance equal to one to two years' salary and give people the option of buying more. At a majority of companies, employees can also buy life insurance for their dependents, says Hewitt Associates, a Lincolnshire, Ill., human-resources firm.



The most common type of employer-offered plan is term insurance, which pays a death benefit if you die during the policy term and doesn't include a savings component.

A key factor to check is whether your company's plan charges the same premiums for all workers or whether the premiums are \"age-graded.\" In the latter design, which is more common, there's one charge for all workers in a particular age bracket -- say, between 35 and 44 -- with lower premiums for younger age brackets and higher premiums for older age brackets.

If there's a single charge for everyone, that coverage may be relatively inexpensive for the older workers but far more expensive than other policies in the marketplace for younger workers. (Life insurance is usually more expensive for older buyers because their risk of death is greater.) That's less of an issue with age-graded plans.

Another big consideration is your health. If you aren't in great health, individually purchased life insurance could be more expensive than the option at work, or even unavailable. If your health is impaired and you are an older worker in a plan that isn't age-graded, that group plan may be particularly compelling.

But if you're healthy, \"you may be paying more by participating in the group coverage,\" says Brendan J. O'Keefe, an accountant and financial adviser in Orleans, Mass. To buy an individual policy, you must typically supply your medical history and pass a medical exam.

Finally, coverage you buy at work typically isn't \"portable\" if you change jobs. \"If you leave your job, you've [generally] left the life insurance too,\" says Kenneth Jarvis, an accountant in Sarasota, Fla.

That lack of portability could be a problem if your health deteriorates, making it tougher or more expensive to buy individual coverage. So \"you'll probably want to have some insurance outside the employer's plan,\" says Mr. Jarvis.

Write to Diana Ransom at diana.ransom@wsj.com

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FROM: http://finance.yahoo.com/insuran ... k&.pf=insurance