Many of us have life insurance through our employers because it is simple. All you have to do is click a box. It’s easy to choose the default, so you do it. And who could blame you? But doing so is often a mistake.
Although your company may provide a certain level of life insurance at no cost, if the insurance is worth more than $50,000, it’s not really free.
Why not? Because the tax code offers a tax exclusion for only the first $50,000 of group term life insurance coverage offered “directly or indirectly” by your employer, according to the Internal Revenue Service. If the life insurance policy does not exceed $50,000, you do not pay taxes on it. If the life insurance policy does exceed $50,000, however, you are taxed.
On the other hand, a life insurance policy that is not employer-offered is not taxed, ever. That is one reason it may be wise to shop around for your own life insurance, but there are others.
For example, if you change jobs and your health changes for the worse, you may not be able to get outside insurance. Who wants to be in that situation? You may think you are not planning to change jobs, and your health may be fine, but, if life insurance outside your employer is offered at a comparable price, why take the chance?
The solution: compare a policy offered by your employer to the exact same kind of policy you could purchase yourself and see which is ideal. We can assist you with that. If you need help, please reach out to us.