Employer-provided life insurance—or group life insurance—is a common benefit for companies to offer their employees. It’s convenient and typically free or low-cost. But does it actually provide enough coverage for your family? Should you get additional life insurance beyond what your employer provides? Here’s our take on it.
What Is Employer-Provided Life Insurance?
Employer-provided life insurance is a type of group life insurance policy that companies offer as part of their benefits package. It usually covers a multiple of your annual salary (typically 1 to 2 times your annual earnings) at little to no cost to you.
Pros of Employer-Provided Life Insurance:
- Convenience: Enrollment is often automatic, requiring minimal effort on your part.
- Cost-Effective: Many employers offer this benefit for free or at a very low premium.
- Guaranteed Coverage: Group life insurance often doesn’t require a medical exam.
Cons of Employer-Provided Life Insurance:
If the monthly premium is reasonable, there’s generally no reason to say no to employer-provided life insurance. But it’s not sufficient coverage for everyone. Here’s why:
- Limited Coverage Amounts: The coverage provided may not be enough to meet all your financial obligations, like mortgage payments, education costs, or long-term income replacement for your family.
- Lack of Portability: If you change jobs or are laid off, you may lose your coverage. Some employers allow you to convert your policy to an individual one, but this can be expensive.
- Restricted Options: Employer policies typically offer limited customization. You might not have the flexibility to choose the coverage amount or add riders to suit your personal needs.
Should You Get Additional Life Insurance?
For most people, employer-provided life insurance is just a starting point. Depending on your personal situation and how many people depend on you financially, you may need additional coverage. Here are some situations where extra life insurance is beneficial:
- High Financial Obligations: If you have a significant mortgage, outstanding debts, or children’s education costs, your employer’s coverage likely falls short.
- Dependents: Families with dependents often require more coverage to make sure their loved ones are financially secure in case of the policyholder’s death.
- Career Changes: If you anticipate changing jobs frequently, having a personal life insurance policy guarantees continuous coverage.
Employer-Provided Life Insurance vs. Individual Policies
| Feature | Employer-Provided Life Insurance | Individual Life Insurance |
| Coverage Amount | Typically 1-2x annual salary | Can be tailored to your needs |
| Portability | Often lost when changing jobs | Stays with you regardless of employment |
| Cost | Usually free or low-cost | Varies based on age, health, and coverage amount |
| Customization | Limited options | Flexible, with various riders and term lengths |
| Underwriting Requirements | Usually no medical exam | May require a medical exam, depending on the policy |
Finding The Right Amount of Coverage
While employer-provided life insurance is a valuable benefit, it’s often insufficient as the sole source of life insurance coverage. But how much coverage is enough?Try our online life insurance calculator to find out. It’s free, totally anonymous, and doesn’t even require an email address. Adding a personal policy doesn’t have to be expensive, we offer customizable plans starting as low as $4 per month. See what offers are available to you today.
