Why life insurance from your employer is not enough

One of the key items on our benefits checklist while getting a new job is to see if our new employer offers us a life insurance policy. If they do, great! Everything seems to be falling into place. But what do you know about the life insurance policy your employer is offering? How generous are the benefits? Is the payout enough to cover your family’s financial needs in the future?

Let’s dive into everything that matters. It’s about protecting your family.

As a benefit, your employer may offer you a group term life insurance policy.

It is essentially a kind of term life insurance that is offered by an employer at zero or low cost to cover employees. At a cursory level, it looks like a good employee benefit. But is it enough? Will it suffice? When you take a closer look, you can see a few holes in it: coverage may not be enough – often just a couple of years’ annual salary, and your family may be at risk if something happens to you and they don’t have enough financial resources; you may therefore need to buy additional coverage at your own cost; coverage is discontinued if you leave the company or get fired and so on.

Not enough coverage

Typically, the group life insurance policy offered by your employer would be pretty basic. That could work if you don’t have a family or any additional financial responsibilities. But if you have a non-working spouse, retired parents, children in school, and other dependents, you might want to rethink your coverage.

Not all employers offer Group term life insurance

According to LIMRA (Life Insurance Marketing and Research Association), the share of employers offering group life insurance as a benefit has dropped significantly from 62% in 2006 to 48% in 2017. The churn in the job market is poised to increase in the face of economic headwinds. With the heightened probability of a recession and layoffs in 2022/2023, group term life insurance from an employer also turns out to be an unreliable tool to protect your loved ones.

There’s always a better option

If you opt for a low-premium term life insurance policy from a highly-rated carrier outside of your employer’s offering, you’re sure to find a policy that locks in your low premium while you’re young and healthy.

In short…

If you can afford to buy additional coverage or a separate term life insurance policy, and it is way cheaper than you think, besides what your work offers you, go for it. An additional cushion of financial security is always a good idea. You’ll be surprised to find more comprehensive, affordable, and reasonable life insurance policies – the kind that you can customize to your family’s needs of today and tomorrow.