Is Life Insurance Through Your Employer Enough Insurance?

Woman using laptop at workPerhaps you have life insurance through work. Whether or not you do, you – like many other people – may have questions, such as: What are the benefits of employer-provided life insurance? Should I purchase personal coverage in addition to employer-provided life insurance? How should I calculate how much life insurance I need?

Here are some answers to help you determine what’s best for you, as part of our ongoing series of blogs that respond to frequently asked questions about life insurance.

What are the benefits of employer-provided life insurance?

The main benefit of life insurance through work is that it initially starts at a lower cost. However, over the period of time that you are employed, it may not end up being less expensive. Unlike personal coverage that allows you to lock-in the premium rate, the premiums for employer-provided insurance will likely go up every year or, at the very least, every five years.

Your health will also affect the cost of life insurance. If you are in poor health, employer-provided life insurance might be a good deal, because it requires no or very little underwriting. However, if you are young and in good health, buying individual life insurance now may allow you to lock in at a lower rate.

What are the benefits of an individual life insurance policy (not employer provided)?

An individual life insurance policy often enables more security and flexibility. For example, an individual policy provides flexibility for both the amount of coverage and the types of coverage you can buy. Typically with employer-provided insurance, you will be able to purchase coverage amounts only in ratios of your salary. With an individual policy, you can buy coverage amounts that fit your needs.

Also, you can select an individual policy that allows you to lock-in your premium rate. With employer-provided insurance, the rate at which premiums increase will differ, but they are likely to increase over time.

In addition, if you change jobs or move – even out-of-state or overseas – your individual life insurance policy won’t be impacted.

Should most employees have additional life insurance coverage?

The “best” option for you depends on your personal situation and needs. Employer-provided life insurance is a low-cost option, but over time that may not be true. It likely will not provide the greatest amount of security for the average employee, because if the employee leaves the company, then the insurance coverage will most likely end. Employer-provided life insurance is a good way to supplement individual life insurance coverage, but it should not necessarily be the only life insurance you have, and it preferably should not be the sole means of coverage that you have for protecting your family’s needs.

How to decide if I have enough coverage through my employer or if I need more?

To determine how much coverage is right for you, you can use our “How Much Life Insurance Do You Need?” page.

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