Basic life insurance is a free or low-cost life insurance option. It’s typically offered to employees or groups and provides a small amount of coverage. But if you currently have a basic life insurance plan, you may be wondering whether you need additional coverage. Keep reading to learn more about what basic life insurance is and how it works.
Also known as employer-sponsored life insurance or group life insurance, basic life insurance is a small policy for employees or members of an affiliate group like a credit union. In some cases, it’s automatic, meaning you’ll receive the benefits unless you decline the policy. Other times, you’ll have to apply for coverage and potentially pay a premium. If you do opt for basic life insurance, you can expect it to be barebones and only offer a small death benefit.1
Basic life insurance is usually free or inexpensive because it’s part of a benefits package from an employer. Depending on the details of the policy, you may have your premiums paid for or be able to lock in coverage for several extra dollars per month.
While basic life insurance plans vary, it’s typical for employers to offer coverage up to a year’s base salary, not including commission or bonuses. Since experts recommend you invest in a plan that provides coverage of at least 10 times your base salary, basic life insurance might not be enough.1 This is particularly true if you’re the primary wage earner in your family or have a lot of debts.
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Here’s a look at the benefits and drawbacks of basic life insurance:
Basic life insurance offers low or no-cost coverage. You can reap the benefits of a plan without spending a lot of your hard-earned money.
Typically, you can receive a basic life insurance policy without undergoing a medical exam. This can be great news if you have a medical condition or want to get coverage more quickly.
Chances are you’ll need more coverage than you’ll get with basic life insurance. You may have to purchase another policy to ensure your loved ones will receive a large enough payout in case you pass away.
With basic life insurance, you don’t get to choose your coverage. You’ll be forced to go with the plan your employer or group offers.
Your coverage won’t follow you if you start working at a different company. If you switch jobs, you’ll have to get another group life insurance policy through your new employer or purchase an individual plan.2
If basic life insurance isn’t available to you or you’d be better off getting an alternative plan or additional coverage, consider these options:
Term life insurance comes with a specified end date that may be 10, 20, or 30 years from the time you purchase the policy. If you pass away before your policy expires, your beneficiaries will receive the death benefit payout. Aflac offers term life insurance with extensive coverage and reasonable rates.
Whole life insurance is a permanent life insurance plan that is designed to last your entire life. It features a death benefit and a cash value component, which lets you save up money tax-free in a secure account. You can take advantage of the cash value while you’re still alive. Aflac whole life insurance can help you financially protect your loved ones for the long term and give you peace of mind.
Universal life insurance is another permanent life insurance plan with a death benefit and cash value. However, it differs from other types of permanent life policies because it allows you to enjoy flexible premiums or change your death benefit amount.
Variable life insurance comes with an investment component in addition to the cash value and death benefit that come with permanent life policies. With this type of plan, you can choose how your cash is allocated and create your own investment strategy.
While basic life insurance can be a great perk, you may not be able to rely on it to protect your loved ones in the event of your passing. That’s why it’s a good idea to consider individual life insurance from Aflac. Learn more about our term and whole life insurance plans and get a quote today!
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1 MoneyGeek - Basic Life Insurance: How It Works & If You Should Buy It. Updated March 8, 2023. https://www.moneygeek.com/insurance/life/types/basic-life-insurance/. Accessed April 5, 2023.
2 SmartAsset - What is Basic Life Insurance? Updated January 27, 2023. https://smartasset.com/life-insurance/basic-life-insurance. Accessed April 5, 2023.
Life – 68000 Series - In Arkansas, Idaho, Oklahoma, Oregon, Pennsylvania, Texas, & Virginia, Policies: ICC1368100, ICC1368200, ICC1368300, ICC1368400. In Delaware, Policies A68100-A68400. In New York, NY68100-NY68400. Term/Whole Life – B60000 Series – In Arkansas, Idaho, Oklahoma, Pennsylvania, Texas, & Virginia, Policies: ICC18B60C10, ICC18B60100, ICC18B60200, ICC18B60300, & ICC18B60400. Group Whole Life - Q60000 Series - In Arkansas, Policy Q60100CAR. In Delaware, Policy Q60200M. In Idaho Policy Q60100CID. In Oklahoma, Policy Q60100COK. In Oregon, Policy Q60100COR. In Texas, Policy Q60100CTX. Group Term Life Q60000 Series - In Delaware, Policies Q60200C. In Arkansas, Idaho, Oklahoma, Oregon, Texas, Policies ICC18Q60200C, ICC18Q60300C, ICC18Q60400C.
The content herein is provided for general informational purposes and is not provided as tax, legal, health or financial advice for any person or for any specific situation. Employers, employees and other individuals should contact their own advisers about their situations. For complete details, including availability and costs of Aflac insurance, please contact your local Aflac agent.
Aflac insurance coverage is underwritten by American Family Life Assurance Company of Columbus. In New York, coverage underwritten by American Family Life Assurance Company of New York.
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