Group Insurance and Its Pitfalls

No matter how accurate your expenses are or how much you are able to save each month, without sufficient insurance coverage your financial health has a substantial element of risk. One of the main purposes of insurance is to provide financial security and risk mitigation to ensure that retirement funds are not utilized to cover medical expenses and loss of income during recovery or potential death.

Group insurance is a common form of insurance that many people feel is adequate, but often is not. Below we will go over general group insurance and its common pitfalls.

Group Term Insurance

• Your work term insurance is generally less than what is required due to maximums placed by insurance companies. The ideal amount of term life insurance should cover your family’s expenses as if you were still working until your significant other is able to retire unencumbered and your children are no longer dependent on your income.

Disability Insurance

• Similar to term insurance, group disability generally has a few shortcomings.
• Benefit Maximum, this means that there will generally be a monthly maximum amount regardless of your income that you may qualify for group insurance.
• Benefit duration, most group insurance plans provide coverage until age 65 which is perfectly reasonable.
• Definition of disability, this is the main reason why a group disability policy may not be adequate. After two years, if you are able to work ANY occupation, your policy will cease disability payments, while an individual policy may ensure that you will continue to be paid if you are unable to work in your current position.

Critical Illness

• Critical illness is a unique insurance policy because the coverage can be heavily dependent on the individuals needs therefore there is not one universal answer.
• As a guideline, you would want this lump sum amount to cover any time away from work and for medical costs such as surgeries and rehabilitation.

We understand that this is a lot to keep track of. If you are curious about your group insurance and if it is sufficient, please feel free to reach out and we will have it reviewed.

Matthew Gomes, CFP, CIM

Financial Planner