Periodic musings of a former corporate executive who is between gigs.

Friday, May 20, 2011

Insuring your future

You've wrapped up your last day at work. You've got the big severance check. You've figured out how much you'll need every month to cover your bills. Now what should you do?

Snatch up that new pair of Jimmy Choos you've been admiring? Test drive that new sports car you've always wanted? Or how about buying a modest pair of tickets to the Dodgers game? (Notwithstanding the fact that no one wants to watch the Dodgers this year and you could probably get killed in the parking lot).

Nope. None of the above. Here's what you should be doing ---- revisiting what you're spending on life and disability insurance.

Now, I know what you're thinking. Is there anything more boring than this? It sounds absolutely morbid. What a downer on your first weeks of freedom!

But now that you are unemployed, you will not want to be up all night worrying about what will happen to your family if you do happen to meet with some misfortune in the Dodgers' parking lot. You should tackle this now. And it's the perfect time to do so since it won't matter if you fall asleep in the middle of the day reading all those policy documents.

Let's talk about the easy one first--- life insurance. It's easy because there's rarely ambiguity about a claim. Putting aside folks like Jimmy Hoffa, you're either dead or you're not.

These days, most executives have group life insurance provided through their employer as a minimum amount of coverage. You may also have one or more policies you've purchased on your own.

The coverage you were previously receiving from your employer typically stops at the end of your employment. However, many US insurers allow departing employees to convert their coverage to an individual policy. You'll know if you have this option when you receive your exit paperwork. If you choose to convert this coverage, you'll be asked to pay premiums monthly or quarterly to continue the coverage.

But should you? When I looked into this, I discovered that the price I'd pay to convert my corporate policy was significantly higher than the price my employer was charging me. So you may be able to get comparable coverage elsewhere at a better price. Of course, this will depend on your personal circumstances and you will want to consult your financial adviser before making any final decisions. But, at a minimum, you should do some comparison shopping before you just convert the policy from your former employer.

If you don't want to face a bunch of insurance agents, at least check out your options online. Assuming you buy from a reputable company, life insurance is really a commodity and your decision shouldn't be impacted by whether the company has a pretty logo or a talking duck. For US policies, two such comparison sites recommended by Kiplinger are accuquote.com and insure.com.

You may also find out that you're overinsured. If you're single, you should seriously consider how much life insurance you really need. Yes, it would be nice to leave a pretty sum to your nephew in Seattle if you happen to die. But if you're unemployed and cutting down on your monthly expenses, this may be a place to cut without impacting your lifestyle. After all, you won't be around to enjoy it.

Once you've conquered death, you need to deal with the more complicated topic of long term disability (LTD) coverage. But let's deal with that in a future post. After all this talk of death, I need to do something fun. Even the Dodgers game seems appealing!

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