Don’t get us wrong: It’s certainly nice that your employer group life insurance offers this free or low-cost insurance as part of your overall benefit package. But for reasons we’ll get into momentarily, this benefit often leaves people thinking they have enough life insurance coverage when that just isn’t the case.
As open enrollment season approaches, you might be thinking about whether group life insurance is right for you. That means examining the costs and the benefits, and making sure you understand both the upside and the drawbacks, so you can make the best decision for yourself and your loved ones. Below, you’ll find out more about what group life insurance is (and isn’t), and whether it offers enough coverage to protect those who matter most at a time when they might need it most.
What is employer-provided group life insurance?
Let’s start here. Employer-provided life insurance, or group life insurance, is typically offered as part of your employee benefits package. And is intended to provide your beneficiaries with some money in the event of your death. In short, the employer pays all or some of the monthly premiums. And the policy covers the group of employees who have signed up for it. Even if employees are asked to contribute toward the monthly premiums, group coverage is generally an easy and affordable way to secure life insurance coverage. Sounds ideal, right?
How much life insurance can I get through work?
While the specifics of each employer-provided insurance policy will vary. You’ll generally only be able to cover one to two times your annual salary. If you’ve already worked out roughly how much you’ll need. And that small amount is sufficient (generally if you have no spouse, dependents, or significant debt), then life insurance through work might be enough for you — until circumstances change, of course.
Industry experts generally recommend you have enough life insurance to cover between 5 and 10 times your annual salary.) And though employers may offer the option to buy supplemental life insurance coverage. You should compare premium rates to what’s on the open marketplace and also understand portability (does it go with you when you leave your job?) before deciding to buy a policy through work
What does a insurance plan cost? Is it worth it?
There are certainly benefits to getting life insurance through work, starting with the fact that it’s often free (or at least very cheap). It’s also convenient because it seemingly reduces the need to compare group life insurance companies. Get multiple quotes, and often you can buy a policy completely online. (Hey, your benefits provider did the research for you.) It’s also more open to all — because group coverage is based on a broader collection of people. Having a health issue that might cause you to pay higher premiums isn’t as much of a factor.
But as with those easy-to-access office snacks that usually don’t nourish your body nor soul. A group life insurance plan, while convenient, doesn’t always provide adequate coverage or the best value for your dollar. For example, if you’ve worked out that you need, say, a $1 million life insurance policy. It might be challenging to secure that much coverage through a group-offered insurance policy. And you could be paying more than you would purchasing an individual policy. (Unless your benefits provider offers a new type of policy called Salary Protection.)