Employer-provided life insurance is a valuable benefit for millions of workers.
Employer life insurance is a type oflife insurance that your employer provides to you and your co-workers. It’s usually a fixed dollar amount at smaller companies and a multiple of your salary at larger companies. Typically, the multiple is one to three times your current salary.
The benefits of employer life insurance
It will cost you nothing (or very little)
The fact that life insurance from your employer is often free is a big advantage. And, if there are fees, they’re usually only a few dollars a month.
You are not required to pass a medical examination
Life insurance is usually provided by your employer to all employees, regardless of their medical condition. If you have health issues, this can be a big plus. A health condition can make it difficult to obtain life insurance on your own.
It is convenient
There is no need to get multiple quotes, schedule a medical exam, or do any other research. You normally just need to fill out a few forms and designate a beneficiary.
The disadvantages of employer life insurance
It often does not provide the necessary coverage
Most people need coverage well in excess of one, two or even three times their annual salary to secure their family’s financial future. Indeed, insurance professionals recommend coverage equal to 10 to 15 times your annual income. This is especially true if you have children or debts (or both).
Therefore, it’s best to assume that your employer’s life insurance is nowhere near enough.
Top-up coverage is usually more expensive than buying your own policy
You may be able to purchase additional coverage through your employer’s policy. While this option is convenient, it can be more expensive than hiring an advisor or insurance agent to purchase your own life insurance policy.
You have few options
Typically, you don’t have as many policy options as if you contact an insurance advisor or agent.
Your employer has the right to terminate it at any time
You lose your coverage when your employer decides to discontinue it. This is becoming more common as fewer companies choose to offer or maintain group life insurance.
It is related to your employment situation
You will also lose your coverage if you change jobs, retire or are made redundant. If this happens, you will need to obtain your own insurance. It may become more difficult as you get older or develop a medical condition.
You may not be able to convert your supplementary insurance
When you leave the company, not all employer life insurance policies allow you to convert your supplemental life insurance. Expect to pay a rate increase if you can convert the policy when you leave.
Explore your options beyond employer life insurance
The disadvantages of employer life insurance often outweigh its advantages. The biggest downside is the mistaken belief that your employer’s life insurance provides adequate coverage for you and your loved ones.
By working with an insurance advisor or agent, you make sure you have all the coverage you need. He or she can determine the amount of coverage you actually need.
Once you’ve determined the amount of coverage you need, it’s time to shop around. In addition to the supplemental insurance quote, compare quotes from your insurance advisor or agent. Be aware that it may be worth paying a little more for a portable and flexible font that you own and control.
Finally, employer life insurance is a great place to start. However, it almost never provides adequate protection. So take the time to determine the level of cover you really need and consider taking out your own policy.