Is Employer-Provided Life Insurance Enough?

When it comes to financially preparing for an unexpected death, the best way to do so continues to be by having life insurance. And, perhaps the most common place people get life insurance is through their employer. Among other benefits, many companies offer life insurance to their employees after they are hired. While this is a great benefit to have at work, it can also provide a false sense of financial security to those who have it, as it likely won’t be enough to protect your family’s financial future.

What Is Employer-Provided Life Insurance? 

When a company offers its employees life insurance coverage, they typically do so on a group basis. In other words, they provide the same benefit amount (or percentage or multiple of income) to all eligible employees. Because it is offered on a group basis, it is commonly referred to as group life insurance. This coverage is often offered at no cost to the employee, which is the best part of it. Although, it is important to note that for any life insurance benefit amount offered over $50,000, the employee will have to pay taxes on what the cost of the life insurance would be if they had to pay for it.

What Benefits Does Group Life Insurance Offer?

Group life insurance is an extremely important benefit for many people. The reason it can be so important is that there is typically no health exam or health questions required to qualify for it. So, even if an individual has poor health, including chronic or incurable diseases, they can still have access to life insurance through their employer. And, once employees are enrolled in the group policy, their coverage can continue until they leave the company. Some companies even offer additional coverage amounts, beyond the initial amount they provide, which the employee can purchase at the same group rate for all employees in the same age range. This increased insurance amount can often be purchased without a full health check as well.

What Are the Downsides of Only Having Employer-Provided Life Insurance?

Although group life insurance can be a great benefit to have, if you rely solely upon it and have no other life insurance in place you can leave your family financially vulnerable. As mentioned before, the amount of coverage offered in a group policy is often limited to a certain percentage of your salary, which probably will not be sufficient to cover your loved one’s financial needs for very long. If you are able to purchase a higher amount of group life insurance through your employer, this can offset that concern but then brings up a new one: you may be spending much more money than you need to be—especially if you are healthy—as your cost of insurance is going to be based on many other people who may be in worse health than you.

Additionally, group life insurance does not stay with you if you change jobs and leave your company, meaning that once you move on, you may no longer have life insurance coverage and are left to try to qualify for a new policy at an older age and, perhaps, worse health.

Why It Is Important to Also Own an Individual Life Insurance Policy

Individual life insurance policies offer significant benefits that group plans do not and at potentially much lower costs. Most importantly, you have greater flexibility and control over the type of coverage and amount of money your family can receive upon death. With an individual policy, you can choose the amount of coverage that works best for your financial situation and customize the policy and benefits to fit your specific needs. Additionally, an individual policy is portable, meaning that you can take it with you if you switch jobs or retire.

Do You Own an Individual Life Insurance Policy?

Don’t let your family’s financial security be put at risk. Make sure to protect them with an individual life insurance policy that will provide the benefits they need and the flexibility you need. Contact CEG Life Insurance Services today to get more information about life insurance options that are available to you. One of our trusted insurance agents can assist you in finding the right individual life insurance policy for your family’s needs.