Updated: March 2017
Q: My employer provides life insurance. Why would I need another policy?
A: Cindy Donaldson, an Allstate agency owner in Succasunna, New Jersey, learned from experience that life insurance offered through employers may not be there when you need it.
In 1999, at the age of 40, her husband Bob developed pancreatic cancer and was given just four months to live. His employer told him that once he went on disability, he would lose the life insurance benefits that he had as a full-time banker.
It was nothing personal, she recalled Bob being told. That was the policy.
Fortunately, Donaldson says, the family was not left without benefits when Bob passed away. That's because he hadn't relied solely on his employer's policy. He had purchased term, universal and whole life insurance policies on his own. The death benefits from those policies allowed Donaldson to maintain the family's lifestyle, including continuing to raise their son and daughter on the farm where her husband grew up.
Term life insurance. which is typically purchased for periods that range from one to 30 years, pays out a specific amount to beneficiaries. Universal and whole policies are types of permanent life insurance that typically gain cash value through interest.
In her role as an Allstate agency owner, Donaldson says, rarely a day goes by when she doesn’t tell potential customers what happened to her – and point out the possible pitfalls of relying solely on employer-supplied life insurance or not having life insurance at all.
“Most people seem shocked,” she said. “I’m educating them, and it does make them think. People are often really, really, really under-insured.”
A life insurance agent can help you determine the type of policy and amount of coverage that's right for you.