Nearly everyone believes life insurance is important, but at least 40% of Americans don’t have any, and many others don’t have enough. Do you know if you have enough life insurance?
Life insurance is, very simply, an income replacement for your family. What would you need to protect those you love if you were no longer there to bring home a paycheck?
How Much Life Insurance Do You Need?
Make a list of what expenses your family would have in the event of your death. Besides immediate expenses like a funeral or medical bills, what ongoing costs would your family need help paying for?
Consider whether your spouse would need help paying for basic living expenses. Would life insurance be needed to pay monthly rent or mortgage, or perhaps the goal would be to pay off your mortgage or other large debt so that monthly bills are more manageable? Would life insurance be needed to help your children pay for college? What about paying for your family’s health insurance premiums? Consider the ages, medical condition and earning potential of your spouse and children. What about other relatives who depend on you financially to any degree?
Next, make a list of your family’s assets which could help meet ongoing needs, such as short term or retirement savings accounts. For most people, existing assets would not be enough to meet your family’s needs in the event of your death. A life insurance policy can help cover those gaps and extend your reach to provide for your family in the event of your death.
Some experts suggest purchasing between 6 and 10 times your annual salary in life insurance, while others ask you to focus on calculating annual expenses. You may need more insurance than you can purchase through Alliance Benefits. If so, consider carrying more than one policy. Unlike other kinds of benefits where there are rules about how products from different companies interact with one another, there is no limit or downside to carrying multiple life insurance policies – although of course you do not want to pay for more than you need.
Your Homemaker Spouse
What about your spouse who is a homemaker? Historically, many people underinsured their spouse, thinking only in terms of wage-earning or funeral costs. To realistically determine a spouse’s life insurance, think of both the outright and hidden costs to replace vital home services – childcare, meal preparation, cleaning, transportation, administrative support – the list goes on and on!
What’s Included in your Alliance Health Plan?
Did you know that your Alliance Health Plan enrollment includes $30,000 Basic Life Insurance on the employee, with the ability to purchase up to $250,000 on the employee, up to $50,000 on your spouse, and up to $10,000 on your children? (Please note that life insurance begins to reduce at age 65.)
Purchase Voluntary Life at First Enrollment
Employers take note: the best time for employees to purchase extra life insurance from Alliance Benefits is when they first enroll in the Alliance Health Plan.
When you purchase the optional extra life insurance (called “Voluntary Life Insurance”) at first enrollment, no medical questions are asked and you cannot be denied coverage. This is called “guaranteed issue” since you are guaranteed to be issued coverage regardless of a medical condition. This is the most valuable aspect of employment-based life insurance.
People who know they have serious medical conditions should always review employee benefits when they are first hired at a new job since this would be their best (and potentially their only) opportunity to buy coverage. If a church decides to join the Alliance Health Plan for the first time, all enrolling employees are eligible to buy the maximum life insurance when the church first enrolls – regardless of a medical condition.
Family Status Change Events
Alliance Health Plan participants have a few other opportunities to purchase extra life insurance as a “guaranteed issue” – no medical questions asked. Participants can purchase extra life insurance within 30 days of:
Open Enrollment Buy Up
Alliance Health Plan participants who already purchased some Voluntary Life insurance, but less than the maximum allowed, are eligible to buy up one increment during annual Open Enrollment. For example, if you previously purchased $20,000 on yourself and $10,000 on your spouse, during Open Enrollment you are eligible to buy up one $10,000 increment on yourself and one $5,000 increment on your spouse, for a new total of $30,000 on yourself and $15,000 on your spouse.
Apply through the Medical Underwriting Process
What if an Alliance Health Plan participant would like to purchase extra Voluntary Life insurance at any other time? They may apply through a medical underwriting process with Standard Insurance where medical history will be reviewed and coverage may be approved or denied.
The greatest advantage of purchasing life insurance through Alliance Benefits (or through any employer-based life insurance) is guaranteed issue purchase at allowed times. If you have missed these opportunities and now need to purchase life insurance through a medical underwriting process, consider whether to purchase through Alliance Benefits or check out the open market.
One advantage of purchasing elsewhere is that your life insurance will not be tied to your job and will not be affected when your job ends. As with all employment-based life insurance, if you stop working at your church, your Alliance Benefits health plan (including life insurance) will end when your active employment ends. You will be offered portability or conversion opportunities at our insurance company’s rates, but these will be much higher than group rates.
If you’re applying for new coverage to replace an old policy, a general rule of thumb is to not cancel one until you are certain you have qualified for a replacement policy. Even expensive coverage may be better than none, particularly if you know you have a serious medical diagnosis.
If you have questions on Alliance Benefits life insurance, please call (800) 700-2651 and we’ll be happy to let you know what is available in your specific situation.
Beth joined Alliance Benefits in January 2001. In her role as Benefits Consultant, she focuses on building relationships with churches and districts, and assisting with Health Plan and 403(b) questions. She is assigned to serve the churches and districts in the Western and Southern US, and the multi-cultural districts.