Is life insurance through work enough?

A woman in glasses wonders if her group life insurance through work is enough coverage to meet her needs

Life insurance through work—also known as group life insurance—is much like guaranteed issue life insurance and is a popular benefit offered by many employers that works similarly to an individual policy.

While group life insurance through work can be an affordable start to creating a financial safety net for your loved ones, it is usually limited in coverage. In this article, we’ll help you figure out if your life insurance through work is enough.

What is employer-provided group life insurance?

Group term life insurance is often offered to employees of a company as part of a benefits package. Due to its ease of access, many people choose to opt in to their company’s life insurance policy. While this is a convenient option, it may not always provide you with enough coverage to protect your loved ones. The business that takes out the policy is the owner of the policy when it comes to group life insurance. Two types of group life insurance typically exist: basic and supplemental.

  • Basic group term life insurance is generally offered at little or no cost to the employee and typically offers 1-2 times your annual salary. This could seem like a favorable option, as the sign-up is typically quick and easy. Additionally, you may not be required to have a medical exam to qualify. 
  • Supplemental life insurance policies provide some additional protection that you pay for as part of your company’s group rate. They often offer 3-4 times your annual salary and may require a medical exam. While there are more steps involved in acquiring this type of coverage, the policy amount could be very appealing as it’s often much more than a basic group life policy.

When can I sign up for group life insurance?

The first opportunity you’ll likely have to sign up for group life insurance is when you first become an employee. After that, your employer should have an employee benefits open enrollment period—typically toward the last half of the calendar year—where you can sign up and make changes to your benefits that go into effect at the start of the new year.

You can also make changes to your benefits after a major life change, such as having a baby or getting married. The workplace open enrollment period is always a great time to reevaluate your life insurance needs and make any required changes. 

What are the benefits of group life insurance?

One of the great things about group life insurance is that qualifying can be easy, affordable and convenient. Unlike individual term life policies, group life insurance doesn’t take a particular person’s health history, age, or gender into consideration and there is no medical exam. Premiums are determined by the entire group, are usually less expensive, and are often paid for by the employer as part of their employee benefits package. However, the coverage provided by basic group term life policies is usually limited.

When Group Life Insurance is Not Enough

While group life insurance is typically easy to qualify for, it often doesn’t provide the amount of life insurance coverage most people need. Group plans are limited in their coverage options, and relying solely on this policy could cost you in the long run. In addition, group life insurance costs may increase over time, especially because they are based on a large population set that may have varying health challenges. 

Unlike term policies purchased on your own, group life insurance typically has a lower death benefit. The coverage usually only amounts to your annual salary or at the most, double.

Consider what you would need to cover in case you passed away unexpectedly: the mortgage on your house, any outstanding debt, living expenses for your family, and perhaps college tuition for your children. For most people, one year’s worth of salary is not enough to take care of these expenses. This is why many financial experts recommend purchasing life insurance coverage that is 10-15 times your annual salary. 

Your employer can choose to discontinue the group life insurance benefit at any time, which could leave you with a gap in protection. Additionally, employee-provided life insurance only covers you while you’re still an employee at that company. This means if you leave the company (either by choice or via a layoff or firing), your life insurance coverage is terminated.

If your next employer doesn’t offer life insurance, purchasing your own policy could be your only option. With the cost of life insurance rising as you age, not only will it likely be more expensive, but it also can be more difficult to obtain coverage the longer you wait. 

Another drawback to group life insurance is that carriers usually don’t allow you to add riders to your policy. A rider is additional coverage added to your life insurance policy (for an additional cost) that covers events your standard policy does not. Riders allow you to customize your life insurance to meet your specific needs.

Benefits of Purchasing Your Own Life Insurance Policy

Purchasing your own life insurance policy, especially a term life insurance plan, can give you flexibility in both price and coverage. If you have coverage through your employer, purchasing an individual life insurance policy along with your employer coverage can help boost your overall coverage and widen that financial security net for your family.

One of the great features of term life insurance is predictability; you can trust that your insurance rate will remain the same for the length of the policy. This helps you to budget accordingly.

Because your individual policy is based on your specific medical exam and not the aggregate of a group, generally healthy individuals can expect to pay much less for more coverage than purchasing group life insurance through their company.

You can also easily make changes to your insurance policy as you get older and your life changes. Perhaps you need a basic 10-year term plan at the beginning of your career before you own a home or start a family, but you want to explore more coverage options later on as these circumstances change. At that point, you can buy longer-term coverage or convert your term plan to a whole life insurance policy.

Even if your employer offers group term life insurance, it’s still worthwhile to carry an individual policy for added coverage. You can take your individual life insurance policy with you when you leave your job and be assured your coverage will continue to provide for your loved ones.

Let SelectQuote find the right life insurance policy for you today. 

Most people have no idea how much life insurance they need, but our life insurance calculator will give you a headstart. Whether you want coverage to help supplement an employer-provided group life insurance policy or basic term life insurance to provide for your loved ones, let us help you find the right life insurance coverage for you.

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