5 Reasons why life insurance from employers is never enough

September was Life Insurance Awareness Month, and individuals are asking more questions than ever about life insurance coverage as a result of Covid 19.  Many are offered a life insurance benefit from their place of work and are often shocked to learn about the limited benefit that tends to be provided.

Employer Insurance

Here are 5 Reasons why life insurance from employers is never enough

Group life insurance from an employer is a great benefit, but it should not be relied on to be the only life insurance resource since it often provides limited coverage for family protection.  Based on the reasons outlined below, many individuals will consider additional life insurance to supplement group benefits offered by employers.

  1. Group plans are often not enough coverage.

The life insurance coverage provided by an employer group plan is normally a small amount of coverage.  Often time it is a multiple of the employee’s salary.  For example, one or two times the salary amount.  In other cases it may be a fixed dollar amount such as $50,000.  Some plans allow you to increase the coverage at the group rate but it can become costly.

  1. Coverage terminates if you leave the employer.

Employer-provided life insurance, like most benefits, is not portable.  Meaning it does not go with you when you leave an employer. Further, there’s no guarantee that the next employer will offer the same amount and cost of life insurance.   While some employers allow you to convert the group life insurance to an individual policy, the premiums are often higher compared to what can be purchased on your own. Employer life insurance plans are based on a guaranteed issue basis which means the policy is issued regardless of age and underlying health.  Group rates are calculated based on an average age of all workers who participate in the plan and can sometimes be higher compared to a policy based on an individual’s specified age.

  1. Waiting will increase costs based on age and unknown health changes.

Life insurance rates are based age, and a health rating when a policy is started.  Putting off purchasing additional life insurance will cost more money even if health remains the same.  Life Insurance rates increase as a person gets older no matter what.  Changes in medical history can also cause a life insurance policy to become more costly and runs the possibility of not qualifying for life insurance coverage based on major changes to underlying health.

  1. Premiums tend to be higher when purchasing additional employer coverage.

Some employers allow the option to purchase additional life insurance coverage for an additional cost.  This optional insurance may be very expensive, mainly for younger people, because it’s priced on a guaranteed issue basis.  Again, meaning, everybody who works at an organization is covered, regardless of their health.  The rates are averaged based on an age sample of workers from the youngest to oldest person in the organization.  Younger people will more than likely pay higher premiums due to the fact that older workers participate in the plan.  An individual life insurance policy based on someone’s attained age tends to be more affordable compared to additional group coverage.

  1. No ‘Living Benefits’ exist with group life.

Employer-provided life insurance policies are often the most basic term life insurance policy with no additional features or benefits.  Group life insurance provides a basic death benefit which is often a limited amount of coverage. There are various types of life insurance available to individuals, some of which offer a permanent death benefit with other living benefits.  Purchasing individual life insurance allows you to shop from several different companies who offer different rates and types of policies that may provide additional benefits that are not available through a group plan.

A life insurance review with our staff can help determine if the life insurance coverage provided by your employer is sufficient coverage for you and your family. Our agency is happy to offer a complimentary life insurance review to all of our clients.  Please reach out today to discuss your life insurance needs and verify you have an appropriate level of coverage!