Is Your Employer Life Insurance Plan Enough?

Most employers provide Group Term Life Insurance policies as a benefit to their employees, it’s a great perk to take advantage of for extra security but that’s exactly what it is, just a small perk! Most Group Term policies will not be sufficient to meet your family’s financial needs. Furthermore, do you really want your loved ones to be dependent on your employer to pay out to fund your final expenses?

Issue #1Being Dependent on an Employer Plan

While employer provided life insurance plans are simple to enroll and cheap or free, the death benefit on that policy most likely is not enough for your family to rely on. It’s advised that you have 6 – 10 times your salary in coverage, and the most a group term policy will pay out is typically only $50,000. This coverage will not be enough for your loved ones to depend on to be financially secure. Some policies allow you to purchase extra coverage at a low rate, so you may be able to have the actual coverage needed for your family but you still do not control that policy. Your family has to go through your employer to obtain the funds, do you trust your employer to payout in a timely manner?

Issue #2Being Dependent on an Employer Plan

If you decide to change jobs, or you get laid off you will lose your life insurance coverage, you never want to have periods of time when you have no life insurance coverage, and you never know when someone is going to need to pay for your funeral. Some employer provided plans allow for you to convert into an individual plan, but your premium rate is more than likely going to drastically increase and if you have lost your job the premium may be unaffordable. It’s always in your best interest to own your plan, you can obtain the proper coverage at a low rate that will be locked in no matter the changes in your life. What if your employer decided to cut cost and do away with the life insurance benefit? Now you are left with no coverage.

Issue #3 Being Dependent on an Employer Plan

If you solely depend on your employer provided plan, and then you suffer a serious medical condition that forces you to leave your job, you may lose your life insurance coverage and be uninsurable to obtain your own plan just when your family is going to need it the most. Or if you wait until you start having significant enough health issues and never took the time to secure your own plan, now you are stuck at your current job because you cannot get insured anywhere else.

Issue #4 Being Dependent on an Employer Plan

Does your employer plan provide coverage for your spouse and dependents? Most benefit packages only covers the employees’ death, or provides minimal coverage for your spouse. As the breadwinner of the family you do want to have proper coverage on yourself but don’t forget about the financial impact on the family if your non-working spouse or child passes away. If your employer sponsored plan does not provide adequate coverage for your spouse and dependents you need to secure your own privately owned policy covering the entire family immediately!

Issue #5 Being Dependent on an Employer Plan

Employer provided plans are usually convenient and easy to sign up for, but they may not be your cheapest option. Term life insurance is more affordable than most families think. If you are a non-smoker and in good health, coverage can be very affordable, you can also lock in that rate for as long as you maintain the policy. Unlike your group term policy where rates can fluctuate as you age.

I definitely encourage individuals, especially singles with no kids, to take advantage of an employer sponsored life policy if provided but it should not be your only life insurance policy. Nor should you rely on the additional paid coverage offered, you likely can secure an individual policy for less than and have more coverage.

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