When it comes to employee benefits, most of us recognize that we’re fortunate to have them. Employer-paid benefits, such as health insurance, dental coverage, and 401(k) matching, can significantly improve our overall financial well-being.
However, there’s one area where many employers fall short – life insurance. In this blog post, we’ll shed light on why the life insurance offered in most group plans may not be as beneficial as it seems and how employers can do better by offering options with permanent insurance that build cash value. So, if you’re an employer or an employee, keep reading to discover how to make the most out of your employee benefits.
The Pitfalls of Conventional Group Life Insurance
Limited Coverage
The life insurance benefit included in most group plans is typically a low-cost term policy designed to cover your salary. The catch? Your beneficiaries only receive a payout if you pass away while employed at the company with the policy in force. This limitation severely restricts the usefulness of this insurance, as life’s uncertainties don’t always align with your employment status.
Rising Premiums
Life insurance, like all types of insurance, becomes more expensive as you age. So, if you start your career with a group term policy, you’ll likely see your premiums increase over time. When you eventually leave the company, finding affordable replacement coverage can be a daunting task.
Post-Employment Coverage
When you switch jobs or retire, you’ll undoubtedly be older than when you started with your employer. As mentioned earlier, this age increase contributes to higher insurance costs. So, if you wish to replace your employer-provided insurance, be prepared to pay considerably more than you did initially.
Low Utilization
One surprising statistic about term insurance is that over 90% of policyholders pass away without insurance. This statistic underscores the reality that term life insurance primarily serves as a safety net for your loved ones, but it doesn’t provide any benefits for you during your lifetime.
The Benefits of Cash Value Life Insurance
If employers want to truly support their employees’ financial security, they should consider offering options with permanent life insurance that builds cash value. Cash value life insurance is a versatile financial tool that can benefit you and your family during your lifetime, not just after your death. It’s more than just death insurance; it’s a way to build wealth and secure your financial future.
Permanent Coverage
Cash value life insurance offers lifelong coverage, regardless of your employment status. Whether you’re working for the same company or exploring new opportunities, your policy remains in force, providing you with peace of mind.
One of the key advantages of cash value life insurance is that it builds cash value over time. This cash value can be accessed through policy loans (we strongly recommend against withdrawals – more about that in another post), allowing you to use it for various financial needs, such as education expenses, home purchases, or retirement income.
Cash value life insurance offers tax advantages that can help you grow your wealth more efficiently. The cash value grows tax-free (as long as you have $1 in cash value when you die) loans may be tax-free up to the policy’s basis, providing you with a valuable tax-advantaged asset.
Cash value life insurance can be an essential component of your legacy planning. You can leave a financial legacy for your loved ones, support charitable causes, or ensure your business’s continuity by using the death benefit to address estate tax concerns.
Empowering Yourself with Cash Value Life Insurance
Beware, there are a lot of “experts” out there who don’t understand cash value life insurance or worse, make money off of you having your assets managed under their control which gives them a commission as long as you keep your money with them instead of using a smarter strategy that benefits you.
Here are some people who actually know what they are talking about. If you live in California, you can contact me directly. If you live in another state, we can get you a referral.
In the meantime, these books have key information that can help you.
Tax-Free Income for Life by David McKnight
The Power of Zero by David McKnight
Money, Wealth, Life Insurance by Jake Thompson