I have life insurance through my job. Is it enough?

Life insurance paid for by employers has become a popular employee benefit. Even smaller businesses on multi-employer platforms are offering group term policies to employees as a component of their larger benefit package. In fact, 60% of commercial employers in the U.S. offer life insurance benefits and when they do, 98% of employees participate.1

If you have responsibilities, a family, a mortgage — small, employer-provided life insurance policies are a great benefit, but it should also be a reminder to review your long-term insurance needs.

When starting a new job, it’s easy to scan the benefits package for the basics and then toss it in a drawer. But it’s important to check the details of the life insurance provided by your employer to decide if it is enough to cover your family’s financial obligations. According to U.S. Bureau of Labor Statistics, the median life insurance coverage offered by employers is either a flat sum of $20,000 or one year’s salary, which may not be enough.

Unfortunately, it’s a benefit that may also come with strings or limitations.

You can’t take it with you

Life insurance paid for by your employer is an optional benefit. Your employer could stop offering it for any number of reasons, including cost cutting or changes to your benefit programs. If you leave the company to switch jobs, or are terminated, chances are you won’t be able to take your insurance with you. Or, if you’re allowed to keep it, you’ll have to pay for it and it may have to be converted to a different policy, which could be more costly than purchasing individual insurance.

You may feel compelled to stay in a job you don’t love in order to retain the life insurance provided by your employer because of concerns about qualifying for individual life insurance later in life. Fortunately, new non-med and flexible policies available on the marketplace today are making it easier for older people or those with pre-existing conditions to purchase individual life insurance at competitive rates.

In some cases, employer-paid coverage is priced in age increments, which means the premium increases with age. This could cause group coverage to be more expensive in the long run than individual insurance. In other cases, it ends when the employee reaches a specific age or retires, which could mean losing long-counted-upon life insurance benefits just when you may need them most.

Combining employer-provided life insurance with individual life insurance can secure your family’s financial future with policies that are often more affordable than most expect. As with so many things in life, the earlier you plan, the better.

Take the time to review

When your employer offers you a group life insurance benefit, usually during the first few days of onboarding for a new job or role, make sure to take the time to complete all of the forms. Read the details of your coverage so you are aware of the terms and limitations. Take special care to select and name your beneficiaries because this helps ensure your wishes are carried out smoothly.

Next, speak with a trusted life insurance professional to review your existing coverage and discuss a life insurance strategy that factors in the new coverage through your job. If you have a family and responsibilities, it’s important to consider how much coverage you’ll need to help your family with financial obligations. Life and responsibilities change over time – your life insurance professional can help your plan keep up with those changes.

Great benefit, great start

Employer-provided life insurance is a wonderful benefit to receive, especially if it comes at no cost to you. This coverage can even help reduce the cost of our overall insurance strategy and is best seen as a starting point on your life insurance journey to provide financial protection for those counting on you.


[1] https://www.bls.gov/news.release/pdf/ebs2.pdf

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