Is Your Employer-Provided Life Insurance Coverage Enough? (2023)

What Is Employer-Provided Life Insurance?

Employer-provided life insurance is group term life insurance that may be offered as part of your employee benefits package. If available, it is an option for all of a company's employees.

Term life insurance provides a death benefit for the insured's beneficiary. It remains in effect only for a specific length of time. For employer-provided term life insurance, that effective time period is while an employee remains employed by the company.

The amount of coverage is typically determined using a multiple of an employee’s annual salary. Or it may be linked to an employee's position at the company. Usually, employers pay most or all the premiums.

Employer-provided life insurance can be a good benefit, especially if you have no other life insurance in place. Bear in mind, though, that it applies only to the employee, and not to their spouse or children. Also, it’s important to consider whether the coverage offered is sufficient to meet your financial needs.

Learn how to determine whether you should buy an additional individual life insurance policy outside of your employer and about the risks of relying only on an employer-provided plan.

Key Takeaways

  • Many employers offer a certain amount of group term life insurance as part of their employee benefits package.
  • Your employer may pay for some or all of the premium costs of an employer-provided life insurance policy.
  • You may be able to buy additional coverage through your group plan.
  • Relying only on life insurance through your employer could put your family at risk if something happens to you and the coverage is not enough.
  • Buying an individual policy in addition to your company life insurance can be a smart way to ensure the financial protection you need.


Click Play to Learn When You Should Get Supplemental Life Insurance

Benefits of Employer-Provided Life Insurance

Convenience: If employee life insurance is made available to you by your company, starting coverage is simple. Just opt in.

Savings: Because employers usually pay for all or most of company life insurance premiums, employees can save or use for other needs the money they would have spent on coverage.

Acceptance: Most employee life insurance plans are guaranteed, meaning you'll be accepted whether you have serious medical conditions or not.

Early Protection: When you're just starting out or early in your career, you may not have the funds needed for life insurance. Employee life insurance can provide a degree of financial security for those who depend on you.

Added Coverage: You can usually increase your coverage as life events and needs change. An employer may offer the option of paying an additional premium amount to increase basic protection.

Riders for Extra Protection: An employer may offer riders (e.g., for certain degrees of illness and disability) to your basic policy that you may purchase for added protection.

Reasons Why You May Want Additional Life Insurance

Your Employer May Not Offer Enough Life Insurance

While basic employer-provided life insurance is usually low-cost or free, and you may be able to buy additional coverage at low rates, your policy’s coverage may not be enough to meet your needs. Many employers provide employees with about $50,000 to $100,000 worth of coverage, or about a year's salary.

If you have dependents who rely on your income, then you may require additional coverage to provide for their needs in the event of your death. Some experts recommend getting coverage worth five to 10 times your salary.

“Most people are able to buy an additional four to six times their salary in supplemental coverage over and above what’s provided by their employer,” says Brian Frederick, a certified financial planner (CFP) with Stillwater Financial Partners in Scottsdale, Ariz. “While this amount is sufficient for some people, it isn’t enough for employees that have non-working spouses, a sizable mortgage, large families, or special-needs dependents.”

On the other hand, not everyone needs life insurance. If you have no dependents or have an alternative plan for providing for them, your employer’s group life insurance might be sufficient. You may simply rely on the group life insurance, for example, to cover your funeral expenses or debts.

Keep in mind that simply multiplying your salary may not be enough to replace your actual income. Take into account bonuses, commissions, second incomes, and the value of additional benefits such as medical insurance and retirement contributions.

You Can Lose Your Coverage If Your Job Situation Changes

As with health insurance, you want to avoid gaps in your life insurance coverage. If you change jobs, are laid off, or are reduced to part-time status, then you could lose your employer-provided life insurance.

Some policies do allow you to convert your group policy to an individual one, but it likely would be more expensive.

You can generally find a more cost-efficient insurance policy outside of the employer’s plan, says Thaddeus J. Dziuba III, a life insurance specialist for PRW Wealth Management in Quincy, Mass. However, if you can no longer get medically underwritten for new insurance, you may want to opt for the conversion regardless of price, he said.

Even if you don’t leave your job, not having additional coverage can be a risk because of the possibility that your employer stops offering life insurance as a benefit.

Getting Coverage Is More Difficult When Your Health Declines

If you’re leaving your job because of a health problem or if your health has declined, you may struggle to get new insurance because insurers factor in your health when they approve you for a policy. A medial exam is a standard part of the process of applying for most life insurance policies.

“If you relysolely or heavily upon group insurance, and then suffer a medical condition that forces you to leave your job, you may be losing your life insurance coverage just when your family is going to need it the most,” says Jim Saulnier, a CFP with Jim Saulnier & Associates in Fort Collins, Colo.

At that point, it maybe too late to purchase your own policy at an affordable rate, if you can get one at all, Saulnier says. So, having additional coverage outside your employer's plan can minimize the risk that you won't qualify for coverage when you need it.

Your Plan Doesn’t Provide Enough Coverage for Your Spouse

Your employer’s benefits package may not provide life insurance for your spouse. If it does, then the coverage maybe minimal.

"Families can often suffer economic hardship if either spouse dies, not just the primary breadwinner dies," says Saulnier. However, in many cases, employer-provided insurance does not adequately insure the spouse of the employee.

If your current employer-sponsored coverage doesn’t offer a sufficient death benefit for your spouse, then you may want to consider purchasing a separate policy.

Employer-Provided Life Insurance May Not Be Your Cheapest Option

Even if you feel that the life insurance coverage from your employer is sufficient, consider shopping around to see if your employer’s insurance really offers the best value.

The younger and healthier you are, the more likely you will be to find a better rate elsewhere. The coverage provided by employers tends to get more expensive as you age. In contrast, you can purchase guaranteed level-premium term life insurance that costs you the same amount every year for as long as you have the policy.

“Employer coverage starts out being very cheap prior to age 35 and then rapidly increases in price,” says Frederick. “Most policies increase every five years and become incredibly expensive once the employee turns 50. If you are healthy and a nonsmoker, buying a stand-alone policy might be cheaper than taking coverage through your employer.”


When shopping for individual life insurance, consider whether it makes sense to include any riders such as an accelerated death benefits rider, a guaranteed insurability rider, or a long-term care rider.

Supplement Employer-Provided Life Insurance With a Policy of Your Own

Taking advantage of any free or inexpensive life insurance offered by your employer is often a wise financial move, but it may not be in your best interest to rely on it for your only life insurance coverage. Depending on your circumstances, you may want to buy additional coverage.

You can purchase other life insurance policies, such as an individual term life policy or a permanent life policy. Term life insurance offers lower premiums, but is only effective for a set period of time. Whole life policies (a type of permanent life policy) tend to have higher premiums, but they remain in effect until your death and can provide a cash value component.

In general, aim to buy the most insurance for your needs that you can afford at the youngest age. As you get older, your health could decline and your premiums could increase.

If you have other assets that can provide for your dependents, such as investments or money in retirement accounts, then you may need less life insurance. But, if you can afford to, err on the high side when estimating your coverage needs, in part because inflation could erode the value of your policy.

How Much Supplemental Life Insurance Is Necessary?

Life insurance needs are unique to an individual's financial situation, including their dependents and budget. One way to determine how much coverage you need is to multiply your annual salary by a certain factor. Many financial advisors recommend about five to 10 times your annual salary in coverage.

For an estimate tailored to your needs, consider first how much of your annual income that your dependents rely on and how many years they are likely to need it. For example, if you have very young children, then you will need to replace more years of income than if your kids were teenagers or older.

So, for instance, if your family should need $100,000 a year for 10 years to cover their living expenses, then ideally, you should have at least $1 million in life insurance.

Also, consider any large expenditures beyond your dependents' everyday needs. For example, if you expect to pay for your children's college education, then factor in those costs.

Once you've decided on how much life insurance you need in total, consider how much coverage your company life insurance provides and then purchase a supplemental policy to make up the gap.

What Is a Good Amount for Life Insurance?

A good amount of life insurance is an amount that will provide a death benefit that can protect your family from financial struggle, as well as one that you can afford. Many financial advisors saya reasonableamount forlife insurance is five to ten times the amount of your annual salary.For some people, life insurance may not be an ideal financial tool at all.

Should I Get Life Insurance Outside of My Employer?

You may want to consider purchasing life insurance outside your employer if the coverage you are receiving from the group plan is not enough. A common rule of thumb is to have five to 10 times your annual salary in coverage. Another reason for an outside policy is that if you leave your employer, you will likely be uncovered.

What Do You Need Life Insurance for?

You need life insurance if you want to ensure that you can financially provide for dependents in the event of your death. A life insurance benefit can cover or defray the costs of your funeral and burial expenses. It can pay for your loved ones' living expenses for a certain amount of time. It can also pay for your mortgage or other debts. The more life insurance you have, the more protection you can provide to your dependents.

The Bottom Line

Company life insurance, or employer-provided group term life insurance, offers employees a convenient and easy way to get some degree of protection for their dependents by simply signing up for it.

The amount of coverage provided through such programs may not meet all your financial needs and won't continue to cover you should you leave your employer. However, company life insurance can be worth opting into for its fast access to coverage and savings on premium costs.

Should you find that more is needed, you may be able to get additional coverage through your company plan. Or, you can purchase a supplemental plan outside of your company.


Is Your Employer-Provided Life Insurance Coverage Enough? ›

Employer-provided life insurance can be a good benefit, especially if you have no other life insurance in place. Bear in mind, though, that it applies only to the employee, and not to their spouse or children. Also, it's important to consider whether the coverage offered is sufficient to meet your financial needs.

Is workplace life insurance enough? ›

Employer-provided life insurance can be a good benefit, especially if you have no other life insurance in place. Bear in mind, though, that it applies only to the employee, and not to their spouse or children. Also, it's important to consider whether the coverage offered is sufficient to meet your financial needs.

Is it better to get life insurance through employer? ›

Typically, your premiums will increase as you get older. Insurance coverage through your employer is offered at affordable group rates, so purchasing extra coverage may be a good deal for you and be more affordable than individual life insurance.

What are the disadvantages of employer life insurance? ›

Cons of Employer-Sponsored Life Insurance

The coverage is typically only in effect while the employee works for the company, and it may not be portable if the employee leaves the company. Also, group universal life insurance policies can be complex and may require additional fees or charges.

Do I need additional life insurance if I have it through work? ›

If you're offered a free or low-cost life insurance policy through work, it probably makes sense to take advantage of it. But you might also need additional coverage to provide your loved ones with the full coverage they'll need.

What is the average life insurance offered by employers? ›

Depending on your current needs and situation, the life insurance coverage through your employer may be sufficient, but if you have people who depend on you financially, it may fall short. According to the 2021 U.S. Bureau of Labor Statistics, the average life insurance benefit amount for flat-dollar plans is $25,000.

How much life insurance is enough? ›

Most insurance companies say a reasonable amount for life insurance is at least 10 times the amount of annual salary. If you multiply an annual salary of $50,000 by 10, for instance, you'd opt for $500,000 in coverage. Some recommend adding an additional $100,000 in coverage per child above the 10x amount.

Why do employers offer life insurance? ›

Life insurance can boost security and peace of mind for employees. Financial security is associated with higher productivity on the job. The Consumer Financial Protection Bureau has found that when employees have to spend time and energy worrying about providing for their families, they're less productive.

How long does employer life insurance last? ›

Employer-provided life insurance policies typically terminate once you leave the employer. However, some policies may be "portable" after you leave your job, letting you pay for the same coverage via a renewable term life policy.

What happens to employer paid life insurance when you retire? ›

Typically, employers finance re- tiree life insurance on a pay-as-you-go basis, paying increasing premiums as retirees age. Alternatively, employers may prefund retiree life insurance by paying premiums to a deposit fund or a retired lives reserve account through- out the working life of an employee.

Should a 23 year old get life insurance? ›

You should buy life insurance if you're a healthy young adult who wants to lock in a lower insurance premium with a generous death benefit. Companies often offer cheaper life insurance premiums to young individuals who are in good health and have no preexisting conditions.

Can you be denied employer life insurance? ›

Each year, countless families are needlessly denied life insurance benefits under policies provided by a deceased loved-one's employer. When life insurance is part of an employee group benefit plan, a denied claim can be further complicated by a federal law known as ERISA — the Employee Retirement Income Security Act.

What type of life insurance do employers usually offer as a benefit? ›

Types of life insurance benefits you can offer

Most employers offer group-term life insurance as an employee benefit, although other types can be offered. Term insurance is life insurance that is in effect for a certain period of time only.

At what age do you need life insurance? ›

People in Their 30's

The majority of people start thinking about a life insurance policy when they reach the age of 30. The reasons are clear: many people decide to start a family at this age or already have a small child or children.

What is basic life insurance from employer? ›

Basic life insurance is a simple life insurance policy, often offered as part of a benefits package at a company along with group health insurance, paid time off and more. Companies often offer basic life insurance to their employees on a free or very inexpensive basis.

Do I need both life insurance and income protection? ›

As each policy will cover you for different circumstances, it can be beneficial to take out both polices simultaneously (if your budget allows). An income protection policy to cover you during your working life and a life insurance policy to protect your loved ones after your passing.

How much a month is a $500 000 whole life insurance policy? ›

Frequently asked questions. How much does whole life insurance cost? A 35-year-old with minimal health conditions can pay about $571 per month for a whole life insurance policy with a $500,000 death benefit coverage amount. Whole life is significantly more expensive than term life insurance on average.

What percentage of salary should go to life insurance? ›

What percentage of your income should you spend on life insurance? A common rule of thumb is at least 6% of your gross income plus 1% for each dependent.

How much do most employers pay for insurance? ›

In 2021, the average health insurance premium through employers was $7,739 for single coverage and $22,221 for family coverage. Employers pay for 78% of single coverage employee health insurance plans and 66% of family coverage plans, on average. Roughly 155 million people have employer-based coverage as of 2021.

Is $25,000 enough life insurance? ›

A $25,000 life insurance policy is not that much coverage, but it may be enough to cover funeral costs, credit card bills, or other outstanding debts. Plus, a $25K policy will not cost much, and you most likely can get it without taking a medical exam.

Is $100 000 life insurance enough? ›

A $100,000 term life insurance policy is sufficient if you already have enough savings, have few financial obligations or owe little debt. It is also sufficient if you're only looking for your insurance to cover funeral costs or other specific expenses.

Is 50k a lot for life insurance? ›

That's a question many people are asking themselves these days. Sure, a $50,000 policy is not that much coverage, but it may be enough to cover some immediate expenses, funeral costs, credit card bills, or other outstanding debts.

What is the most common type of life insurance policy offered by companies? ›

The most common type of life insurance is term life insurance. Term life insurance is the simplest and most affordable type of life insurance. It provides coverage for a specific period of time, or “term.” If you die during the policy term, your beneficiaries will receive a death benefit.

Does salary matter for life insurance? ›

Your question is this: “Does your income affect your life insurance policy?” The answer to this is no: Life insurance premiums are not based on your income. If your income is substantial, this might be good news; however, if your income is on the lower end, you may find this information to be a bummer.

Does life insurance end when you quit? ›

Generally, if you have no other options, your life insurance coverage will end when you leave your job. That means you'll need to apply for new coverage (either at your new job or independently from a life company or broker) based on your current age and health status.

Can you cash out life insurance after retirement? ›

Withdrawal: In many situations, you can take a cash withdrawal from your permanent life policy, and that money is often not subject to income taxes as long as it's not more than the amount you've paid into the policy.

At what age does life insurance not make sense? ›

As we age, we're at increased risk of developing health conditions, which can result in higher mortality rates and higher life insurance rates. You'll typically pay less for life insurance at age 25 than at age 40. Waiting until age 60 may mean an even bigger rate increase and limited policy options.

What age does life insurance not pay? ›

What Age Does Life Insurance Expire? The age 100 maturity date means the policy expires and coverage ends when the insured person turns 100. One possible result is that the policyholder (and their heirs) get nothing, despite decades of paying into the policy.

Is it too late to get life insurance at 40? ›

While having an older life insurance policy isn't a problem, it's not too late to purchase more coverage in your 40s. Chances are good your income and liabilities have changed over the last decade or more. If so, your life insurance needs have also changed whether you've been paying attention or not.

Why is employer life insurance bad? ›

One of the biggest disadvantages to employer-provided insurance is that few people stay with the same employer their entire adult lives. At some point, you'll move on – but your insurance won't. By then, you'll be older, which will make buying your own individual life insurance more expensive.

What are 3 reasons you may be denied from having life insurance? ›

People are typically denied life insurance because they fall into a high-risk category. This is often due to health challenges like diabetes, obesity or a previous diagnosis of serious disease. There are also nonhealth reasons for being denied life insurance.

What voids life insurance? ›

The five things not covered by life insurance are preexisting conditions, accidents that occur while under the influence of drugs or alcohol, suicide, criminal activity, and death due to a high-risk activity, such as skydiving, and war or acts of terrorism.

How do I know if I need life insurance? ›

The quickest way to know whether you need life insurance is to ask yourself one question: Would your death have a financial impact on the people in your life? If the answer is yes, then you may want to consider life insurance. Life insurance is a contract between you and an insurance company.

What is the average cost of life insurance for a 60 year old man? ›

Average Term Life Insurance Rates by Age

On average, they would pay about $221.25 each year. But if a 60-year-old gets the same policy, they'd pay an average of $1,645.72 a year.

How much is life insurance for a 55 year old? ›

Monthly cost of term life insurance by age
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Feb 14, 2023

Can you legally have 2 life insurance policies? ›

Yes, you can have more than one life insurance policy at a time. While many people receive enough protection with one policy, obtaining multiple life insurance policies can be beneficial after certain life events, as part of your estate planning, and other situations.

Can my wife and I be on the same life insurance policy? ›

A joint life insurance policy, also known as a dual life insurance policy, covers both spouses and may be able to cover more individuals. These policies are generally used by married couples who want to cover both spouses under one policy.

Do you need life insurance if you're alone? ›

Why is life insurance important for a single person? Even if you're single, life insurance can protect others from financial burdens that could be brought on by your passing. Plus, life insurance rates for a young person are generally lower than they are for other customers.

Is group term life insurance a good idea? ›

Group term life insurance is a good benefit to have, but there are some limitations to keep in mind. Because group coverage is linked to employment, if you change jobs, stop working for a period of time, leave to open a business, or retire, then the coverage will stop.

What happens to my work life insurance when I retire? ›

Typically, employers finance re- tiree life insurance on a pay-as-you-go basis, paying increasing premiums as retirees age. Alternatively, employers may prefund retiree life insurance by paying premiums to a deposit fund or a retired lives reserve account through- out the working life of an employee.

What disqualifies you from getting life insurance? ›

A life insurance application may be denied if you have high-risk medical conditions, dangerous hobbies, or if you left important information off your application. You may also be ineligible for certain policies due to advanced age.

What kind of deaths are not covered in term insurance? ›

Accidental death due to intoxication or drugs or if the insured is involved in criminal activity is not entitled to any payouts. Also, accidental deaths when during adventure sports like skydiving, paragliding, bungee jumping, among others too are not covered by term plans.

What is the average group life insurance payout? ›

These group life insurance plans pay the same amount to all employees and are a fixed dollar amount. Payouts ranging from $10,000 to $25,000 tend to be the most common.

How do I cash out my employer life insurance? ›

The first way is to surrender the policy back to the insurance company. The insurance company will give back your policy's cash value minus any fees or penalties when you do this. The second way to cash out your policy is to take out a loan against your policy's cash value. This is called a policy loan.

What is the benefit of employee life insurance? ›

Key employee life insurance is a life insurance policy that insures the life of an employee whose death would cause significant economic loss to a business. Under this kind of life insurance policy, you purchase an insurance policy on the life of an employee.

Does life insurance make sense after 60? ›

Life insurance can provide peace of mind at any age, but isn't always necessary after age 60. To see if you need life insurance, assess your family's needs, your financial resources and assets, your outstanding debts and your long-term financial goals.


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