The Life Insurance Myth: ‘I’m Covered through Work’
When it comes to life insurance, many employees operate under the assumption that their company coverage is enough to handle their needs. Unfortunately, that’s rarely the case, especially for workers with dependents.
Most group plans allow employees to purchase a limited amount of additional coverage, but even that may not be sufficient — and it could be more expensive than buying a separate, individual policy.
The big advantage of company-sponsored group plans is that individual employees don’t have to undergo a medical evaluation or otherwise show proof of insurability. And payments can often be made through payroll deductions — so, it’s easy.
However, a one-size-fits-all policy, depending on your needs, age, and health, may not be the best deal for the long term. That being said, if you’re older or in poorer health, an individual plan could be more expensive, or altogether unavailable to you.
Ask about portability
One potential problem to employer plans is the lack of portability. If you get laid off or change jobs, you could lose your insurance.
Another drawback to employer-sponsored life insurance is that your company may reduce benefits or even drop the plan. This can especially be a problem if health issues have arisen that make you more difficult to insure.
Think about those who rely on your income: your spouse, your children, aging parents, disabled relatives, etc. If you die prematurely, will the life insurance you have be enough to cover their basic needs? Also consider your funeral costs and any medical or legal expenses you’ll leave behind.
Typically, employers provide life insurance equal to one or two years of salary. That may get your dependents through the first 12 to 24 months, but what happens next? Supplemental coverage may be the answer.
Life Insurance: Group Coverage Through Work
Pros
- Employees aren’t required to undergo a medical exam or show proof of insurability
- Payments can be easily made through payroll deductions
Cons
- Coverage is rarely enough for workers with dependents
- “One-size-fits-all” policy may not be the best plan — or the best deal
- Lack of portability, if employment status changes or the employer drops the plan
