For the first time ever, more Americans have employer-provided life insurance (108 million) than have individual life insurance coverage (102 million), according to a new LIMRA study. While that statistic sounds good, it actually hides a few important facts you should understand.

 

1. There's more to the stat than meets the eye. When you dig a little deeper into the study, you'll find that the percentage of households having life insurance coverage through their employer are actually down to 46%, from a peak of 54% in 1984, so the fact is that the percent of employers offering coverage is declining.

 

2. If you have it, it's most likely not enough . Most employer-provided life insurance coverage is one to three times your salary. So if you make $50,000, having up to $150,000 of life insurance sounds like a lot, right? But if you try to put that money to work in today's interest rate environment, you'll soon find out it doesn't go very far. And if your family needs to spend $50,000 each year, what are they going to do after the third year?

 

While your salary may be $50,000, what about your other benefits like health insurance? Employers pay an average of $19,000 a year for health coverage for an employee with a family of four. What if your family had to pay for their health insurance from that $50,000, too?

 

3. It's a benefit, not a guarantee. Most Americans believe employers should be required to make life insurance coverage available (73%, according to the same study), but the fact is employers are not obligated to offer it. And remember that just because your employer is offering it now, it doesn't mean they will next year--or at any point in the future. A lot of companies are in cost-cutting mode, and benefits like life insurance can disappear without notice.

 

4. It doesn't protect your insurability. Think about what would happen if your health changes while you only have employer-provided health insurance, but then they drop the coverage and you're no longer able to get life insurance. Or what if you lose your job, or change jobs and the new employer doesn't offer life insurance as a benefit?

 

Typically, employer-offered group life insurance is not portable, meaning you can't take that coverage with you when you leave a job. Some have the option to convert it to permanent life insurance, but what if you can't afford that option? Buying an individual policy prevents this because it's something you own.

 

The bottom line, then, is that it's good to have employer-provided life insurance, but don't ignore the larger need you may have for individual life insurance coverage, too.

 

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Running a bakery-with crack-of-dawn start times and seasonal crunches-can be tough, but Sherri and John Horsley loved their small business. It offered them the right fit. Sherri's boundless enthusiasm made her the perfect up-front person, and John gravitated to the behind-the-scenes baking. Plus, running their own small business allowed them to spend time with their two young sons, Nate and Dave.

As the business grew, Sherri and John sat down for an annual review with Greg and did a new life insurance needs analysis.
While it was still a new operation for them, the couple met with insurance professional Greg Call to make sure that both their business and their futures were financially secure. And, indeed, Greg saw a gap in Sherri's life insurance coverage, which she addressed. Plus, the couple understood the wisdom in starting retirement plans. As the business grew, Sherri and John sat down for an annual review with Greg and did a new life insurance needs analysis. They discovered they needed more, so they increased their coverage.

Then, just as the holiday rush was upon them, Sherri discovered a lump, which doctors told her was breast cancer. While continuing to run the bakery and going to school for her Master's in family counseling, she bravely battled the disease. While she did experience a period of remission, the cancer returned. Sadly, it was the devastating disease that took her life at just 45.

As John says, "The life insurance has made all the difference in the world to us." It gave him time to grieve, as well as find a buyer for the business so he and the boys could move closer to family. John has also secured the boys' college education and his own retirement.

"We knew life insurance was important, but didn't understand the value until now," he says. "I can say in hindsight that the sacrifice of putting money aside for life insurance--to give you peace of mind and less stress--is totally worth it."

With all the expenses of everyday living, it's tempting to think of insurance as just another cost. What's harder to see is the potential cost of not buying insurance--or what's known as "self-insuring"--and the hidden bargain of coverage.

The Important vs. the Urgent

We've all experienced it: the tendency to stay focused on putting out fires, while never getting ahead on the things that really matter in the long run. For most people, there are two big things that matter in the long run: their families and their ability to retire. And being properly insured is important to both those concerns.

Life Insurance: a Hidden Bargain?

It's exceedingly rare, but we all know it can happen: someone's unexpected death. Life insurance can prevent financial catastrophe for the loved ones left behind, if they depend on you for income or primary care-or both.

The irony is that many people pass on coverage due to perceived cost, when in fact it's far less expensive that most people think. The 2016 Insurance Barometer Stutdy by Life Happens and LIMRA showed that 8 in 10 people overestimate the cost of life insurance. For instance, a healthy, 30-year-old man can purchase a 20-year, $250,000 term life insurance policy for $160 a year-about $13 a month.

Enjoy the Benefits of Life Insurance-While You're Alive

If budget pressures aren't an issue, consider the living benefits of permanent life insurance--that's right, benefits you can use during your own lifetime.

Permanent life insurance policies typically have a higher premium than term life insurance policies in the early years. But unlike term insurance, it provides lifelong protection and the ability to accumulate cash value on a tax-deferred basis.

Cash values can be used in the future for any purpose you wish. If you like, you can borrow cash value for a down payment on a home, to help pay for your children's education or to provide income for your retirement.

When you borrow money from a permanent insurance policy, you're using the policy's cash value as collateral and the borrowing rates tend to be relatively low. And unlike loans from most financial institutions, the loan is not dependent on credit checks or other restrictions. You ultimately must repay any loan with interest or your beneficiaries will receive a reduced death benefit and cash-surrender value.

In this way, life insurance can serve as a powerful financial cushion for you and your family throughout your life, in addition to protecting your family from day one.