Is Group Life Insurance Through Work Enough?

There’s a good chance that your employer offers group life insurance as part of your compensation package. The standard group life insurance policy typically provides $20,000 to $100,000 worth of coverage. And since life insurance provided by employers is a benefit, you don’t have to pay for it through payroll deductions. However, some employers offer other forms of life insurance with higher coverage limits that you can purchase at a discounted rate

Adequate life insurance is essential in case you were to pass away unexpectedly. The proceeds from your policy go to your designated beneficiaries to help them stay afloat as they adjust to life without you. But you might be asking yourself, “is group life insurance through work enough?”

Let’s explore the basics of group life insurance provided by employers and why you might need more.

How Group Life Insurance Works

As its name suggests, group life insurance covers a sizeable amount of people (typically an organization). Because the coverage includes many individuals, the cost per person is meager. The company pays the premiums, and if you die, the insurance company will pay out the policy amount. Most group life insurance policies are term life insurance, which provides coverage for a set period. As an employee, you didn’t have control over the policy. Your employer can change the insurance carrier and policy terms without your consent.

 

You Might Not Have Enough Coverage

Group life insurance is typically free for a reason – you don’t get much coverage. As mentioned, you may only get $20,000. Of course, your family would need a lot more than $20,000 to compensate for your salary and pay for funeral expenses. And even if you asked your employer to raise your coverage amount, they likely couldn’t. Most group life insurance policies have a maximum policy limit (although C-suite executives often get higher policies).

If you have a family to support or lots of outstanding debt, you may need more life insurance. Though, someone with little to no debt and no dependents could get by with life insurance provided by employers. It’s essential to assess your situation during your company’s enrollment period. You may need to be able to buy life insurance outside of open enrollment, and if you buy it without your employer’s help, you might pay more.

You May Lose Life Insurance Provided

Perhaps the most significant disadvantage of group life insurance is that you lose it if your employer fires you or if you quit your job. If you end up unemployed, you’ll have no choice but to buy coverage directly from an insurance carrier or risk a gap in coverage. Unfortunately, those with pre-existing conditions will pay a pretty penny for coverage. Other factors also impact the cost of life insurance – your age, gender, family history, smoking status, and if you have any risky hobbies.

 

What Are the Other Options?

Many companies give their employees the option to buy extra life insurance on top of group life insurance that everyone receives for free. You get a much higher policy amount if you wish to purchase additional coverage. For example, you may be able to buy up to one million dollars of coverage or more. Alternatively, you can go directly to an insurance company and buy either whole life or term coverage. If you decide to go that route, it’s always an excellent idea to compare quotes and ensure you’re getting the most for your money. Also, be sure to read the policy carefully to know what it does and what it doesn’t cover.

 

Now that you know how group life insurance works, it’s up to you to decide if you need more coverage. You should consider the financial impact on your family if you pass away and how much money they need to get through any financial hurdles. You should generally always try to buy life insurance through your employer because you’ll pay more elsewhere.