Why life insurance through your work may not be enough

If you’ve been offered life insurance through work, you know it’s a great perk that can provide you and your family peace of mind in case the worst happens. But is it enough?

For many Americans, the opportunities to access life insurance through work are shrinking. According to a 2020 industry study, the number of companies offering employer-paid group life insurance has dropped significantly over the last several years. People with  group coverage now account for just 45% of all U.S. adults with life insurance, down from 60% a decade ago. A lack of access to group coverage is hitting low- and moderate-income families especially hard, with life insurance ownership rates declining by 25% in this group in the last 10 years.

Even if your employer is among the companies that still offers life insurance options through their benefits package, these plans may not provide ample coverage over the years. Typically, group coverage amounts are smaller than individual life insurance policies, often topping out around four to six times your yearly salary (and sometimes much less than that). Since many people’s expenses also increase over time as they expand their families, get promoted, or buy larger homes, it’s important to buy enough additional coverage now to see you through life’s big changes.

Simply put: Employee life insurance coverage often isn’t enough to cover individual needs, which is why it’s smart to also consider buying an individual life insurance policy. Here’s what to know about work life insurance vs. personal life insurance.

Do employers offer life insurance?

Group life insurance is insurance that is offered through any sort of group, such as an employer or a large-scale association or organization. There are two main kinds of group life insurance:

  • Basic group life, which is a small policy that employers often (but not always) provide to employees automatically as an employee benefit. Typical coverage amounts range from $25,000 a year to a multiplier of your annual salary.
  • Supplemental group life, which allows you to buy additional coverage. These policies can range up to a few times your annual salary. Keep in mind that this type of coverage may require you to fill out an “evidence of insurability” health questionnaire.

Group life insurance can be a convenient way to get life insurance coverage at little to no cost, and it’s often taken right out of monthly pay. If you have outstanding health issues, you can still get the same coverage as your coworkers, with no medical exam necessary. That said, there are also some drawbacks to be wary of when it comes to employee life insurance coverage.

Work life insurance vs. personal life insurance

So is life insurance cheaper through your employer? Company-subsidized plans can mean little or no cost for you, but may not fit the bill when it comes to providing financial protection.

If you have the opportunity to get free or low-cost group life coverage through your employer or another organization, consider taking advantage of the perk – just remember that it may also make sense to supplement with your own personal policy to make sure you’re covering your bases.

When it comes to group life insurance, keep in mind:

  • You may lose coverage if you switch jobs. Just like health insurance coverage, you don’t want gaps in your life insurance coverage if you change careers or lose your job. On average, Americans change jobs every 4.2 years. Since every employer offers unique benefits packages, it’s not a guarantee that you’ll receive the same coverage – or any at all – at your next opportunity. Especially with unemployment rising as a result of COVID-19, it’s a good idea to look into buying your own individual coverage outside of insurance through your employer that will stay with you through every career move.
  • You may not be getting enough coverage. While the right amount of coverage is different for everyone, one rule of thumb is to buy seven to 10 times your annual salary to cover your family in case something happens to you. A smaller group life policy might not be enough to cover expenses like a big mortgage or care for children with special needs. Buying an individual life insurance policy lets you decide, based on your financial needs, the amount of coverage that would be right for your family if the worst happens. Not sure where to start? Our term life calculator can help.
  • Your health could affect your access to group life insurance. Relying solely on your group life insurance may be risky when it comes to health concerns. If you develop a medical condition while you’re employed or after you leave your job, it could be harder and more expensive to get individual coverage. That’s why it’s always a good idea to lock in the best rates while you’re still young and healthy.

What kind of personal life insurance should I buy?

If you’re seeking extra coverage, a personal life insurance policy can help ensure your family is able to cover all the bills and daily expenses after you’re gone. The most popular type of individual insurance is term life insurance. Affordable and flexible, term insurance comes in a variety of term lengths and coverage amounts. It covers you for the entire length of your term, regardless of your job situation. Fidelity Life offers fast, easy term coverage for people of all ages and needs.

If you have health issues, look into specialized personal policies, like simplified issue or guaranteed issue, that don’t require medical underwriting. Fidelity Life offers several options for getting life insurance with no medical exam.

Still need help?

That’s what we’re here for. Get in touch with a Fidelity Life agent today to discuss your coverage needs.

At Fidelity Life, our goal is to make life insurance simple, affordable, and understandable for everyday families. This content is intended for educational purposes only. Each post is carefully fact-checked, reviewed, and updated regularly to ensure the information is as relevant as possible.