As layoffs continue to mount and unemployment numbers reach new heights, Springfield insurer MassMutual has offered tips to help workers avoid losing life insurance.
"Workplace life insurance policies are a great benefit, and employers are to be commended for providing them. At the same time, a lot of workers have become overly dependent on these benefits," said Melissa Millan, senior vice president of MassMutual. "Many don’t realize that most group policies terminate when their job does, don’t give much thought to how much coverage they need, and often don’t realize that permanent life insurance, such as whole life insurance, can be a good fit depending on their planning needs. This unrecognized gap is very worrisome."
In addition to not being portable, workplace life insurance policies typically provide insufficient death benefits for people who want to support dependents after their deaths. Adults with only group coverage carry the lowest amounts of life insurance, according to LIMRA’s Facts About Life.
MassMutual advises people to obtain the amount of life insurance coverage needed and avoid following "rules of thumb," which don’t factor age, income stream from other immediate family members, and ages and needs of dependents.
"Do what’s right for you and your personal situation," said Scott Stillman, general agent of Wealth Concepts LLC of Denver, Colo., a MassMutual general agency.
Workers are encouraged to take action while employed, and apply for individually-owned life insurance with individual companies.
"If you apply for life insurance when you’re unemployed, the life insurance carrier could insure you for less than you might like, because it may factor income into its underwriting," said Kim Michel, general agent of Michel Financial Group, a MassMutual general agency in Los Angeles, Calif.
MassMutual also recommends adding permanent, portable coverage.
"Having whole life insurance as a permanent, guaranteed base, and incorporating term life insurance as a supplement, is a great strategy for many people," said Richard T. Nolan, a general agent of Lee-Nolan Associates, LLC of New York, a MassMutual general agency. "This way, no matter what your employment situation, you always have the coverage through your permanent policy, and in the long run, it gives you not only security but also great planning flexibility. The recession has fostered a newfound appreciation among a lot of people for the peace of mind that this kind of protection provides."
