Somewhere between “prescription drug coverage” and “Friday bagels,” you may see life insurance as a benefit offered by your employer. But is the life insurance coverage provided through your employer enough to cover your family if you were to die?
That depends on your situation, but in all likelihood, it may not go far in paying for funeral expenses, keeping up with mortgage payments, and maintaining a standard of living. That’s why it can be a good idea to supplement an employer-sponsored life insurance plan with an additional term policy.
Here are a few reasons why an employer plan may not be the only term life insurance you need.
Your work coverage may not be enough
While 2 times your annual salary (often the amount associated with a work life insurance policy, though you should check with your employer about your specific policy) sounds like a lot, remember that if you were to die, your family would no longer have your income. If you have a mortgage or are saving for your kids’ college, the life insurance payout may not be able to cover all of your financial obligations. A term life insurance policy of up to a $1 million (or more, depending on your circumstance) can be taken out to supplement this coverage, which can help ensure your family can maintain their lifestyle and pay bills if you were to die. The price of a term policy isn’t likely to break the bank — depending on your age, it may be possible to purchase a $1 million term policy for around $1 a day.
Your work coverage ceases when you leave your employer
While life insurance coverage is a great benefit, it doesn’t follow you to your next job at another company. Conversely, a personal term policy is independent of your job status, and is active for the length of the policy term. Keep in mind that not all employers offer life insurance, so it may be a good idea to have a personal policy that follows you wherever you go and consider an employer-sponsored one an additional benefit.
Your work coverage is group insurance, which can be more expensive for less risky individuals
Employer provided insurance is considered group insurance. That means the premiums charged for the group of employees are based on the overall demographics and health of the group, though individuals within the group will typically pay the same rates as one another. That can create a subsidization effect, whereby less risky (e.g., healthier) individuals within the group effectively subsidize the cost of insurance for riskier people in the group. If your life insurance benefit at work is mandatory, you might not be able to avoid this…but it’s worth considering if your coverage is optional.
More than one policy = more than one payout
One common misconception is that you can only have one life insurance policy at a time. That’s not the case. It’s possible to have both coverage you purchased independently as well as coverage provided by your employer. In case you were to die with multiple active policies, each policy would pay out the full amount of coverage to your beneficiary. Having an employer policy as well as an individual policy can give you peace of mind that your loved ones will be adequately provided for if you were to die.
Waiting to purchase an individual policy may result in more expensive premiums
While you may decide to wait until you no longer have employer-sponsored life insurance to purchase a policy, it’s important to remember that term life insurance rates tend to be least expensive when you’re young and healthy. Waiting until you’re in-between jobs could result in significantly higher rates than they would have been if you’d bought the policy a earlier in life.
Buying an individual term policy gives you choice
When you’re offered a policy by an employer, you don’t have the ability to choose the insurance company or the coverage offered. When you purchase an individual policy, you can choose the coverage you need from the company that makes the most sense for you. But that doesn’t mean it needs to be complicated. Mosaic Life offers affordable policies without time-consuming applications. You can apply online and get a decision and quote in less than ten minutes.
Employer-provided insurance is a benefit. But what is your constant?
Of course, employer-provided life insurance is a great benefit that could potentially help your family if you were to die. But knowing the limitations of your work policy can help you assess whether the coverage is enough for you and your family, and decide whether it makes sense to have an additional individual policy. Now that job-hopping is the norm, it’s impossible to know where your career will be in thirty years. But term life insurance is a constant: As long as you keep paying the premiums — which are locked in on the day you buy your policy — you’re covered for the full term of the policy. Job security may not be something you can depend on (or even care for). But a term life insurance policy is something that can be a constant no matter where your career takes you.
To get a personalized quote for a term life insurance policy, click here.
