Sears cancels life insurance for retirees: What you can learn

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Myles Ma, CPFCSenior ReporterMyles Ma, CPFC, is a senior reporter and certified personal finance counselor at Policygenius, where he covers insurance and personal finance. His expertise has been featured in The Washington Post, PBS, CNBC, CBS News, USA Today, HuffPost, Salon, Inc. Magazine, MarketWatch, and elsewhere.

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Retired Sears employees were blindsided in March when the company abruptly canceled their life insurance benefits.

These were among the last benefits left for Sears retirees, said Ron Olbrysh, chairman of the National Association of Retired Sears Employees. The NARSE had fought to protect the benefits of about 90,000 retirees as Sears fell into decline and bankruptcy over the past 20 years. Olbrysh did not have exact numbers on how many are losing life insurance.

For many, the Sears-provided policies were their only life insurance. They typically offered a benefit between $8,000 and $10,000, Olbrysh said.

"It's not a humongous amount, but it's still a benefit to retirees," he said.

Sears paid $16.6 million in premiums in 2017, according to Olbrysh. Attorneys for Sears did not respond to a request seeking comment.

The company has given retirees the option to convert the policies into private whole life policies, but their premiums are unaffordable, Olbrysh said. An 81-year-old NARSE member said he would pay more than $3,000 a year in premiums for such a policy, Olbrysh said.

"That's not competitive at all," he said.

What to know about employer-provided life insurance

"The biggest thing here is that life insurance coverage through work is never enough," said Patrick Hanzel, a certified financial planner with Policygenius.

The benefits provided by employer life insurance often aren't enough to meet your needs and, as Sears retirees have seen, they can be taken away, Hanzel said. For people in their 80s and 90s, buying private life insurance policies will likely be costly. Life insurance companies charge more as you age because you're more likely to die.

The best option for older people is likely buying final expense life insurance, Hanzel said. Also known as burial insurance, these policies provide smaller benefits to cover outstanding debts and funeral costs and don't have as many requirements as other life insurance policies.

"It's hard to get approved for real life insurance at that age," Hanzel said.

Many employers provide life insurance as an employee benefit. But most cap benefits at one year's salary or at a set dollar amount, often $250,000. Depending on your financial obligations and assets, many people need more life insurance than that, Hanzel said. (Use our calculator to see how much life insurance you need.) That's one of the reasons it's often a good idea to buy your own life insurance policy.

Read more about the pros and cons of employer-provided life insurance.

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