Life insurance could be next on the list of social disruptions. As Gen Z and millennials challenge the concept of traditional careers and lead to an increase in self-employment, the role of group life insurance at work in long-term financial plans is likely to change.
Freelancers understand that they have to take 100% responsibility for their finances, says Jessica Lepore, founder of Surevested, a New York-based life insurance agency. âIt’s not all wrapped up like you have to work for a company. ”
Many people in their 40s and 50s depend on life insurance provided by an employer, says Grant Dunn, vice president of financial services at Lakenan, an insurance brokerage in St. Louis. But younger generations prefer to seek coverage outside of the workplace, he says. Last year, life insurance claim activity grew more than twice as fast for Americans 44 and under compared to those 45-59, according to MIB Group, an information sharing service. for insurers.
âThey are looking more to foreign markets rather than just relying on what they have through their employer because they know their employer is going to change a lot over the next 30 years,â says Dunn.
Younger workers generally don’t stay on the job as long as older workers, according to the most recent data from the Bureau of Labor Statistics. In January 2020, median job tenure was 2.8 years for workers aged 25 to 34, compared to 9.9 years for workers aged 55 to 64.
Workers cannot always convert group living to an individual policy to avoid losing coverage when they leave their jobs. âWhat I would suggest to millennials who are considering changing jobs is just to do it outside of your employer so you don’t have to worry about it,â says Dunn. This is perhaps even more necessary for long-time freelancers, who do not have an employer to provide coverage.
In addition, basic group life insurance may be free for employees, but it often amounts to once or twice a worker’s annual salary. This is usually not enough to provide a financial safety net, says Dunn.
A simple way to estimate how much life insurance you need is to multiply your income by the number of years your beneficiaries will need financial support. This calculation can be tricky for freelancers with unpredictable incomes, but they can follow the lead of workers in commission-based jobs like real estate, where monthly income may not be constant, Dunn says.
He suggests looking at what you earn on average, as well as what people of your skill level in the industry earn over time. Once you’ve estimated your annual salary, you can determine how much your life insurance policy should cover in the event of death.
If you are unsure of your future needs, Lepore recommends purchasing a policy that allows you to adjust coverage over time, such as a term life insurance policy that you can convert to permanent coverage. later.
âThe best thing to do is take out at least one policy,â says Lepore, âbecause this can confirm your eligibility at a later point in your life if you decide you need additional coverage. “
Traditionally, obtaining life insurance can take several weeks and often requires a medical examination. âWith all of the technology today, the younger generation cannot understand that it takes 45 days to put a policy into effect,â says Dunn.
Some insurers have already responded to this problem by using big data algorithms to process online claims in minutes. So if you are looking for quick coverage, these products may be your best bet. However, whether you shop online or not, the type of life insurance you buy should match your overall coverage goals.
Permanent policies, such as whole life insurance, generally remain in effect until your death and include an investment account. You can withdraw or borrow against the cash value of the policy while you are alive. The growing popularity of digital investments may make whole life insurance policies less attractive as an investment opportunity for younger generations, says Dunn. If you just want your life insurance to cover your death and not as an investment vehicle, you can consider term life insurance. Term life insurance covers you for a number of years, has no investment component, tends to be less expensive than permanent policies, and is generally sufficient for most people.