Do you need supplemental life insurance?

Supplementing your company plan

If your company policy just isn't cutting it, you can purchase additional coverage through your company, buy supplemental life insurance or both. The first step to making that choice is figuring out how much life insurance you really need.

"Find an experienced person that deals with life insurance, and do a needs analysis," says Lavine. "Typically, the insurance needs analysis results in people needing five to eight times their current wages in life insurance."

A thorough needs analysis should consider two vital factors: the total amount of your current debts including your mortgage, car payments, student loans and credit card debt, as well as your share of future household expenses such as the cost of your children's future college tuition.

Once you understand your life insurance needs, you'll have to decide if it's better to purchase additional insurance through your employer's plan or buy a separate supplemental life insurance policy. Zadeh says employees debating whether to apply for additional coverage through their company's plan need to first evaluate how long they plan to stay with their current employer, since it might not be wise to purchase supplemental insurance through a company plan if you see a layoff or job change in your future.

"It's always good to know the (insurance) company, how long they've been in business and what their ratings are," Zadeh says.

Policyholders will also need to examine whether additional term insurance they purchase through an employer-sponsored plan can be converted down the road. While some term insurance policies can be converted to cash value policies after a certain number of years, some term insurance plans cost an outrageous amount to convert or simply can't be converted at all.

Dan Cotter, principal and director of risk management with Rehmann Financial in Westlake, Ohio, says policyholders thinking about purchasing additional insurance through a company plan should do some comparison shopping before taking the plunge. Premiums for an individual policy over a long period of time -- Cotter says 10 years or more -- can be less expensive than purchasing through a company plan.

Regardless of whether you purchase supplemental life insurance or additional company insurance, Cotter says to make sure to take any free life insurance your company is willing to offer. "I've never ever seen a case where someone has said that they have too much life insurance," he says. "Never."


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