So
you're going through the wonderful
process of completing an
individual/family health insurance
application and you come to an option for
term life insurance. There's a
tendency to just mark yes to avoid the
hassles of another application and to
stop the nagging inner-voice that tells
you to get life insurance. Let's
take a look and see if selecting life
insurance through your health insurance
carrier makes sense.
The
information here reflects
individual/family health insurance.
If term life insurance is offered
through you employer, we have provided
more information at our
individual
versus group life insurance article.
A
trend over the last decade or so is for
health insurance carriers to offer term
life insurance as an option. The
coverage usually comes in smaller
amounts than what you can find through
our term life insurance quoting engine.
The usually amounts might look something
like $15K, $30K or $50K. Rarely
will you find amounts that are higher
for individual/family health coverage.
The benefit of jointly applying for term
life insurance through health insurance
is that it's all one application...one
which you're competing any way for the
health coverage. It's this
simplicity that encourages most people
to just mark "yes" next to this term
life option. There's a real cost
to doing this so let's investigate
further.
The
key point with life insurance is cost
per dollar of coverage. If you
really want life insurance protection
then buying your own
term life insurance
plan will be the much better value.
Let's take an actual example of a 30
year male in California. Through
our quoting engine the average rate for
10 years of $50K term life is
$6/monthly. Through a major health
insurance carrier, the term life rate
would be $11. That's almost double
for the cost per dollar of term life
insurance. You are going to pay
significantly for the convenience
factor. This is only half the
story. With a stand-alone life
insurance policy, your rate is locked in
based on the age at the time of
enrollment. With life through your
health plan, the rate may increase as
you get older and we know that age
significantly affects your term life
rate.
Another key point with life insurance
through your health carrier is that it
may be dependent on you keeping the
health coverage in force. If you
cancel the health coverage, you may not
be able to keep the life insurance and
that defeats the purpose of life
insurance to begin with.
People are constantly going in and out
of the job market. The other more
important issue is the amount of life
insurance you are able to purchase.
$50K will not address most
life
insurance needs. As we discussed
in our related article, most life
insurance needs revolve around income
replacement over long periods of time
and $50K will only go so far. This
amount is more likely suitable for
final
expense issues such as funeral costs,
debts incurred, taxes, and estate
settlement. In order to have
larger amounts, you're better off
purchasing your own term life policy
which you can keep regardless of the
status of your health coverage.
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