When you purchase life insurance, the premium is based on two main factors: the age and health of the applicant. Buying life insurance while you’re young is a smart practice, because once you develop a chronic illness, your insurability is at risk.

Most people have life insurance through their employer, but it’s important to understand how that coverage actually works. Group life insurance is group term life. The employer is the policyholder, and you’re issued a certificate that guarantees a death benefit if you pass away while employed. Not all group life insurance is portable — so if you’re terminated or retire, your coverage may end along with your employment.

This brings us back to that premium factor. Say you’ve had group term life since you started working. When you turn 65 and retire, you discover your coverage isn’t portable, meaning you now have to purchase a new policy on your own. For example, $30,000 in term life coverage might cost $15/month at age 30 — but that same coverage could cost $60/month at 65. The question becomes: can you still afford it?

A Broker’s Recommendation

As a broker, I advise clients — and anyone shopping for insurance — to consider the following approach, especially if you’re currently covered under a group plan:

1. Buy your own policy early, regardless of whether you’re covered by a group plan, to lock in a lower, level premium while you’re young and healthy.
2. If you’re covered by a group policy, consider also buying a whole life policy of $20,000 or more — either an Indexed Universal Life (IUL) policy or a straight whole life policy. Whole life coverage lasts until age 100 as long as premiums are paid (or you can choose a 10-, 20-, or 65-pay option to have it paid up within that time frame). Because it lasts your entire life, whole life is often considered “final expense” coverage, and it also builds cash value you can borrow against. This way, regardless of where you work in the future, you’re guaranteed coverage for final expenses — even if a future employer doesn’t offer life insurance at all.
3. If your employer does offer term life, you’ll have that term coverage to pay off debts, leave a gift to a loved one, or supplement the income your spouse and kids lose — on top of the whole life policy covering your final expenses.
4. If your employer doesn’t offer life insurance, consider buying your own term policy, which is typically cheaper and offers a larger death benefit, in addition to your whole life policy. If your term policy is through the same carrier as your whole life policy, you may be able to convert some or all of the term coverage into whole life before it expires — protecting that coverage for good.

A Few Final Notes

Life insurance is stackable — meaning that when you pass away, every policy you hold will pay out. This is different from health benefits and accident protection, which typically don’t allow stacking.

Life insurance is an essential piece of your long-term retirement plan. Whenever a major life change occurs, it’s good practice to reevaluate your coverage and purchase additional insurance if needed, to protect yourself and your family’s best interests.