Is the life insurance you have at work enough? 3 ways to tell
If you work full-time, chances are you have some life insurance through your employer — 75% of full-time workers in the U.S. have access to life insurance as an employee benefit and 98% of those workers are covered.1 But is it all the life insurance coverage you need?
Many people mistakenly think it is, even though they could benefit from having their own life insurance outside of work.
Here are three things to consider:
1. Is it enough coverage?
If your employer offers life insurance and you signed up for it, at least you have some coverage. That’s better than no coverage. But it might not be enough to give your family the funds they need to make ends meet if the worst happens to you.
Research shows that one of every three families would be in financial trouble in less than one month if they lost a primary wage earner — and the percentage grows to 70% within six months.2
You can help your family avoid this hardship by making sure you have enough life insurance to replace your paycheck as long as needed (for example, until the kids leave home or the mortgage is paid off).
Your employer may limit the amount of group coverage available to you, leaving you short.
2. You can’t take Life Insurance with you.
Even if you can get enough coverage through your employer, that coverage may end before you want it to — and may end suddenly
Group life insurance is an employee benefit that usually ends when your employment ends. Even if you’re going to a new job immediately, you may not be eligible for benefits right away — if the new employer offers it at all. And, if you lose your job to a lay-off, downsizing, or firing — or if you retire — it might be a while before you can replace the coverage.
If your strategy is to buy individual life insurance later, keep in mind, that your health, driving record, and credit history must remain solid in order to qualify for it. Also, coverage generally costs more as you age.
3. No extra benefits or cash value.
Employer coverage is usually affordable and reliable. But it’s also usually pretty basic, meaning it doesn’t accumulate cash value over time or have any extra benefits under your control
- Cash value. An individual policy you buy from an insurance agent can last for life — usually up to age 100 or 120 — and, depending on the type of policy, can build up a cash value that you can borrow against or use to pay part of the cost of the policy. Employer group plans don’t offer these options.
- Extra benefits. These days, many individual life insurance policies offer additional benefits during the living years. These include features that provide part of the death benefit early if the insured person is diagnosed with a terminal illness or needs long-term care. Another feature can extend coverage to others in the family. These extra benefits may carry an additional cost, but that cost may still be lower than stand-alone coverage.
For these reasons, it might be wise to think of employer coverage as a supplement to your own individual policy, instead of relying on it as your only source of life insurance coverage. That puts you in the driver’s seat to choose the type and amount of coverage that’s right for you — and that can be customized to your needs.
1 – National Compensation Survey, Employee Benefits, Bureau of Labor Statistics, 2018
2 – Insurance Barometer Study, LIMRA, 2017
