Renting can provide many great benefits. It is great for transition periods during your life until you have decided on a permanent residence. You don’t have the responsibilities of maintenance as you do when owning a home. You don’t have to pay several thousand dollars for a down payment and closing cost. Utilities are much cheaper. And you can pay for short term leases without carrying a 20 or 30-year mortgage.
But renting can also have its downsides. You don’t build up equity. You don’t have the ownership of that property; therefore, you are limited to “making it your own”. You aren’t able to buy as an investment – once you move out you cannot sell it or rent it for a profit. And many times, you are paying more per month on rent than you would for a mortgage.
Many can argue the pros and cons of renting vs. buying a home, but when it comes to life insurance, several of these examples can relate.
Taking advantage of group life insurance that is offered through a job is great and most of the time, pretty inexpensive. But that life insurance policy is temporary – just like renting. If you leave the company or get laid off, you are not able to keep your life insurance policy. Depending on current age and health conditions, obtaining a life insurance policy at that point can be quite costly. Group life insurance through work is typically a term life insurance policy and is capped at a certain limit based on your income. Because of this, it does not allow for you to “make it your own,” and help you reach your personal financial goals and/or provide the right amount of coverage that you and your family actually need.
When you “own” your life insurance policy – or I should say, carry a life insurance policy outside of work, you can customize your coverage amount and policy type to fit your specific needs. Whether it is for mortgage protection, income replacement, supplemental retirement income, providing a tax free legacy to your family, and many other benefits of life insurance, obtaining a separate life insurance policy offers peace of mind and help you achieve the financial goals for you and your family.
While it is beneficial to take advantage of group life insurance offered through work, it is equally important to carry a policy outside of work. Think of it as investing into your family’s future. There are many types of polices; therefore, it is important to have a discussion with your agent or financial advisor to find the best solution for your needs. The example of “renting vs. buying” can also be used when comparing term life insurance to permanent life insurance (but we’ll save that for Part 2)!
So ask yourself – do you rent or own your life insurance?