Can Life Insurance Through Your Employer Protect Your Family Financially?
Pros and Cons of Group Life Insurance Through Your Employer
You may need to add an individual life insurance policy outside of your group insurance policy through work to protect your family financially properly. This will leave your family with enough money to cover debts, tuition, retirement, medical costs, income replacement, etc…
Life insurance through your work is a nice benefit, but it might cover less than you and your family need. It can put your family at risk of potential financial hardship.
If you have life insurance through your employer
You need to look at these two main things:
Number 1: Is your death benefit high enough?
Usually, your death benefit won’t be enough if you have life insurance through your employer.
*Your death benefit is the amount that the insurance company will pay out to your family if something happens to you.
Number 2: Can you take the insurance with you when you get a new job?
Most of the time, your life insurance will be gone.
You can get your life insurance independently outside of your employer to avoid this. This way, you will have total control no matter what job you have; your life insurance stays with you.
What should you do to ensure the life insurance through your work is enough?
Follow these simple three steps to determine which insurance policy you should get.
- Determine how much life insurance you need:
You need to replace your income and make sure you cover your debts. Everyone needs a different amount. People with multiple kids might need more than people with no kids. Homeowners: If you own a home, make sure you get enough to cover your mortgage. If you get enough life insurance, your family will be able to invest the benefit into an interest-bearing account, live off of the interest alone, and maintain their current lifestyle financially.
- Determine the length of the insurance:
Make sure the term of your policy is correct. Life insurance companies give the option to have anywhere from a 5-year term policy all the way up to a permanent life insurance policy. An example of this would be a homeowner who still has 20 years to pay off their home; a 20-year term life insurance policy will cover that mortgage during the 20-year period while the home is still being paid off.
- Shop & compare
If you have life insurance through your employer, you might be limited to the amount of life insurance companies to pick from. In reality, there are hundreds of companies and combinations of life insurance policies you can choose from. We have a tool that you can use to compare and even self-enroll If you want to. Click here to shop and compare.
Overview of the advantages and disadvantages of Life insurance through your employer.
- It is convenient: Easy, they won’t give you too many options to choose from. The paperwork might be done by HR, and you can go there if you have any questions.
- Price: Most likely, your employer will cover the costs of your life insurance or offer it at a low price
- Guarantee: Most policies through your employer will accept you even if you have serious medical conditions.
- Coverage stays with your job: if you move or switch jobs, you may not be able to take the policy with you. Some employers offer to convert your policy from an employer-based to an individual one. However, you will most likely end up with a higher price. The older you get, the higher your policy will be, so it is better to lock in a reasonable rate for a policy earlier on.
- Your choices will be limited: coverage through your employer might be through one insurance company, and only a couple of plans will be available. Most of them are term life policies with a limited death benefit.
- Amount: Your policy’s death benefit most likely will be on the lower end. Most people need more than what their work offer to be able to leave their family financially protected. If you get better coverage, it can cover your family’s debts, mortgage, and retirement, and it can even help cover tuition for your children.
If you don’t want to be limited by the policy through your work, you can add a policy that fits your needs better.
You can use Policy Engineer’s life insurance tool to calculate how much life insurance you need, compare different companies, and self-enroll. We are happy to assist you; if you need any help, schedule a meeting with one of our policy engineers.